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HSA Tax Advantages
A Health Savings Account (HSA) enables anyone with a qualifying high-deductible health insurance plan to shelter HSA contributions from federal income taxes. By reducing your adjustable gross income and through tax-deferred growth, HSAs can reduce your income taxes.
Here are several ways an HSA can offer tax advantages:
- Reduce your federal income taxes. Regardless of your income level, any money you deposit into your Health Savings Account is considered an "above-the-line" deduction, giving you a 100% write-off against adjusted gross income. There are no income limitations.
- Reduce your state income taxes. For those states that follow federal tax treatments, accountholders are eligible for the same tax benefits at the state level as they receive at the federal level. However, treatment of HSA contributions at the state level varies. Consult a tax professional for more information on your state’s tax benefits.
- Tax-deferred growth. Like funds in an IRA, the money in your account grows tax free.
- Pay for a wide range of medical, dental and vision expenses with pre-tax dollars. Pay for eligible expenses for yourself, your spouse and tax dependents.
- Pay Medicare expenses with pre-tax dollars. You can use your funds to pay Medicare Parts B & D premiums, as well as deductibles, co-pays, and coinsurance under any part of Medicare. If you have retiree health benefits through a former employer, you can also use your HSA funds to pay for your share of retiree medical insurance premiums.
- Pay for long-term care insurance with pre-tax dollars. You can use your funds to pay for qualified long-term care premiums.
HSA Tax Questions
How much can I contribute to my HSA?
The amount that can be contributed to your HSA changes each year. Click here for contribution limits.
What is the cut-off date for contributing to my HSA ?
You may contribute to your HSA for the current tax year until April 15th of next year.
Is there a penalty for over contributing to the HSA?
Yes, you must pay income tax plus a 6% tax penalty on the excess contribution.
What tax forms will I get? What is reported to the IRS?
Two tax forms will be provided to you and to the IRS.
Form 1099-SA reports the distributions made from your Health Savings Account during the calendar year: This form is provided no later than January 31. The amount in Box 1 of your 1099-SA should be reported on Form 8889
Form 5498-SA reports the contributions made to your Health Savings Account. . Our custodian bank provides this form no later than January 31 for contributions made during the calendar year. Taxpayers who make additional contributions between January 1st and April 15th for the prior year will be provided a revised 5498-SA form in May. Please note that this form is informational and is not filed with your taxes.
What tax forms do I need to complete?
All taxpayers who have a Health Savings Account must complete Form 8889 if:
- they, or someone on their behalf, made contributions to their HSA
- they received any HSA distributions
- they failed to be an eligible individual during the testing period.
- they acquired an interest in an HSA because of the death of the account beneficiary.
Health Savings Account IRS Links
Please click here for additional tax forms and publications.