HSA Tax Information

Health Savings Accounts are a way to decrease your taxes and keep more of your income. Savings could range from 28 percent to 41 percent, depending on your individual tax bracket.


How Can I Get the Maximum Tax Savings from Contributing to an HSA?

The preferred way to contribute to your HSA is through payroll deductions.  If your employer will agree to deduct these from your pay pre-tax (which requires a group Section 125 plan in place) you as an employee save Federal taxes, FICA taxes and usually state taxes right there on the spot as your paycheck is being processed.

The icing on the cake is that because you no longer have to pay FICA taxes on that income, neither do they.  Your employer saves FICA taxes on every dollar your pre-tax through a Section 125 plan, including HSA contributions.

But even if your employer will not agree to do this and you are on your own, you still save Federal and usually State taxes on every dollar you contribute to a HSA.  When you complete your tax return after year-end, you will be allowed to deduct the entire contribution off of page 1 of your Form 1040. 


What Do I Need to Know at Tax Time?

For 2019 tax returns, the deduction appears on Schedule 1 of your 1040, line 25.

Technically you are allowed to contribute to your HSA up to your normal tax filing deadline (Normally April 15th) for the previous calendar year. 

After the end of the year you will receive two tax forms from us.  Please make sure your address is always current in our system so this form will be generated and mailed to the right address. 

-        IRS Form 1099-SA will be sent out around the end of January to include total distributions from your account for the previous calendar year.  These forms will also be loaded on our website for you to view and print when you log into your account.

-        IRS Form 5498-SA will be mailed to account holders by May 31st of each year.  This form includes total contributions to your account for the year.  Since individuals can contribute to their HSA up until April 15th of each year for the previous year, these forms are mailed out after April 15th. They will also be available on our website for you to view and print when you login to your account.  This should not prevent or delay you from preparing your tax return since you can look up your contributions on our website anytime.  

-        You will be mailed  an Annual Report in February which will also detail your contributions for the year. A copy of this Annual Report can also be viewed online.

-         A prototype IRS Form 8889 will also be available online in February.  This is to be used as a guide to help you complete the actual IRS Form 8889 you will need to attach to your IRS Form 1040.  Form 8889 will ask how much of your distributions were for Qualified Medical Expenses.  Only you can determine that amount since you maintain your own documentation.   Any distributions should be backed up by valid receipts including the name of the patient, date of service, a description of the service and the amount.  Charge card receipts are not adequate.  Services must be received on or after the date your HSA Account was opened.  We highly recommend you keep those receipts with your tax return.  You will be required to pay Federal and usually State taxes on any distributions for non-medical purposes along with a 20% penalty.