A health savings account (HSA) is an account set up with a qualified HSA trustee that is used to reimburse qualified medical expenses incurred by an individual, their spouse, and their dependents. HSA accounts are used by eligible individuals that have medical coverage under a high deductible health plan (HDHP), and distributions from the plan to pay for qualified medical expenses are excludible from gross income.
Form 8889 is used to report the contributions to and distributions from the HSA for the purpose of determining the HSA deduction and if any distributions are taxable.
An eligible individual is:
- covered under a HDHP and has no other insurance coverage, with the exception of telehealth and other remote care coverage;
- is not enrolled in Medicare;
- is not a dependent on someone else's tax return.
See the Form 8889 instructions for the kinds of products and services that qualify. Note that a qualified medical expense paid for by an HSA cannot also be included as an itemized deduction on Schedule A (Form 1040). Qualified medical expenses do not include expenses incurred prior to when the HSA was established, nor expenses paid for by insurance or other coverage.
An individual who received distributions from an HSA must file an income tax return, even if they had no taxable income or had no other reason to file a return.
The Form 8889 has three distinct sections:
Part I – HSA Contributions & Deductions - This section of Form 8889 is used to report contributions that were made to an HSA by the taxpayer, their employer, or a trustee-to-trustee funding distribution from a traditional or Roth IRA. Employer contributions are reported on the taxpayer’s W-2 in Box 12 with code W. The taxpayer's contributions are reported on Form 5498-SA (but generally not until after the original filing deadline of their individual tax return.) Contributions are deductible up to annual contribution limitations.
Part II – HSA Distributions - The distributions menu is used to report any distributions made from an HSA. These distributions will be reported to the account owner on Form 1099-SA. Distributions can be made either to the taxpayer or a designee and are to be used to cover medical expenses or to reduce the amount in an HSA account due to excessive contributions. Distributions used to pay for qualified medical expenses are not taxable, however distributions used for ANY other purpose are taxable and may be subject to an additional 10% penalty.
Part III – Failure to Maintain HDHP Coverage - Use Part III to figure any income and additional tax that must be reported on Form 1040 or Form 1040-NR for failure to be an eligible individual during the period.
Form 1099-SA Distribution Codes
The distribution code in Form 1099-SA Box 3 indicates the kind of distribution made and its tax ramifications. Depending on the code, the taxpayer may also be subject to additional taxes.
| 1 | Normal distribution. |
| 2 | Excess Contributions: This code denotes that the taxpayer, employer, or others on the taxpayer’s behalf have made more than the allowed contributions for the year and they made the distribution of the excess amount. This amount may be subject to additional taxes. |
| 3 | Disability: This code shows the taxpayer became disabled and is not subject to the additional tax on a distribution. |
| 4 | Death distribution other than code 6: This distribution was made due to the taxpayer's death and is not subject to additional tax. |
| 5 | Prohibited Transaction |
| 6 | Death distribution after year of death to a non-spouse beneficiary. |
HSA Contribution Limits
HSA contributions can be made for a given tax year, up to the original due date of the tax return for that year. The annual contribution limits are subject to an annual adjustment. Recent year limits are as follows:
| 2024 | 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | |
| Contribution Limit (Single) | $4,150 | $3,850 | $3,650 | $3,600 | $3,550 | $3,500 | $3,450 |
| Contribution Limit (Family) | $8,300 | $7,750 | $7,300 | $7,200 | $7,100 | $7,000 | $6,850 |
| Additional Catch-Up Contribution | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 |
HSA Contributions (Form 5498-SA)
To enter contributions to a HSA in TaxSlayer ProWeb, from the Federal Section select:
- Deductions
- Adjustments
- Health Savings Account - If MFJ, select Taxpayer or Spouse.
- Type of coverage under high deductible health plan - From the drop down menu choose Self Only or Family, and if Family indicate if the spouse has a separate HSA.
- HSA Contributions you made for 20xx - Enter the contributions made during the tax year. This includes contributions for the tax year made in the following year but before the filing deadline, but doesn't include employer contributions made through a cafeteria plan (shown on Form W-2 Box 12 with code W) nor a contribution via a funding distribution from an IRA. This amount is typically found in Form 5498-SA Box 1, though that form may not be up to date with contributions made before the filing deadline.
- Number of months during this tax year that you were an eligible individual - Select the number of months from the drop down menu.
- Amount you and your employer contributed to your Archer MSAs for 20xx - If the taxpayer also has a Medical Savings Account (MSA) that their employer contributed to, enter the amount contributed here. If the taxpayer and spouse both had HSAs and had family coverage under an HDHP at any time during the year, include any amount contributed to the spouse's MSA.
- Adjustment to Box 12 Code W - Enter an adjustment if the amount on the W-2 includes contributions for either the previous tax year or the following tax year.
- Qualified HSA funding distributions from an IRA or Roth IRA - Enter the amount of contributions to the HSA made via direct transfers from either a traditional or Roth IRA.
HSA Distributions (Form 1099-SA)
Total HSA distributions received during 20XX - Enter the amount of distributions indicated on the individual’s Form 1099-SA in Box 1. If there are multiple Forms 1099-SA, enter the sum of the Box 1 amounts. Additionally, if the distribution code on Form 1099-SA is 5 for a prohibited transaction, enter here the fair market value of the HSA as of January 1 of the tax year.
Distributions used for qualified medical expenses - Enter the total of the qualified medical expenses that were paid for with HSA distributions.
Distributions you received in 20XX that you rolled over into another HSA - Enter the amount of distributions received that was rolled over into another HSA account, if any.
I meet at least one of the exceptions to the 20% tax - HSA distributions not used for qualified medical expenses are subject to an additional 20% tax, however there are several exceptions:
- The beneficiary has died, or
- The beneficiary has become disabled, or
- The beneficiary has reached age 65.
If the taxpayer meets one of the exceptions, select this line, answer Yes to the exception question, and enter the amount that qualifies.
HSA Adjustments
Line 3 Limitation - The amount entered in this field adjusts the amount reported on Form 8889 line 3. It is the greater of:
-
- The limitation shown on the last line of the worksheet, or
- The maximum amount that can be contributed based on the type of HDHP coverage you had on the first day of the last month of your tax year.
- Use the worksheet in the instructions to figure the amount to enter here
Line 6 adjustment - The amount entered in this field adjusts the amount reported on Form 8889 line 6. If the taxpayer and spouse had separate HSAs and also had family coverage under an HDHP, see the Form 8889 instructions for how to calculate the adjustment to enter here.
Line 7 amount - If the taxpayer is ag 55 or older at the end of the tax year, is married, and the taxpayer or spouse had family coverage under an HDHP at any time during the year, enter the additional contribution amount here, if any.
Note: This is a guide on entering Form 8889 into TaxSlayer ProWeb. This is not intended as tax advice.
Additional Information: