Tax season is coming. If you have a Health Savings Account (HSA), you’re probably already aware of the great tax benefits that come with it. But there are also some key HSA tax forms you should be aware of so you can make sure you have your finances in order before the annual tax deadline.
Tax benefits of an HSA
HSAs are triple-tax advantaged. That means:
- Qualified contributions to your HSA are tax-free. This means if you contribute via employer payroll, pre-tax funds will be contributed. If you contribute funds yourself post-tax, you can deduct those contributions on your personal income tax return. Anybody can contribute to your HSA.
- The money in your HSA grows tax-free. Investing your HSA is a great option for those looking to grow their money for the future.
- Qualified distributions are tax-free. HSA distributions used for qualified medical expenses are always tax-free. Once you are over age 65, you can use HSA funds to pay for non-medical expenses with no penalty. You simply have to pay income tax like a regular IRA.
HSA eligibility and contribution limits
Before even thinking about your tax forms, it’s a good idea to make sure you are eligible for an HSA and following the IRS’s contribution limits. The IRS sets contribution limits for HSAs for individual and family plans. They update the limits every year, and the limits apply to the full calendar year. If you exceed the contribution limits for a year, you may be subject to taxes and penalties.
To qualify for an HSA you must be covered by a high-deductible health plan (HDHP), can’t be enrolled in Medicare, and can’t be claimed as a dependent on another person’s tax return. If you’re not sure if you are eligible for an HSA right now, check out this in-depth look at HSA eligibility requirements. If your eligibility changes throughout the year, it could impact your contributions, so it is a good idea to stay on top of your eligibility status.
Specific forms you’ll need from your HSA provider
There are a few HSA-specific tax forms that you may need to file if you have an HSA. Your HSA can also impact your individual income tax return and W-2. If you contributed and/or withdrew from multiple HSAs during the tax year, you may receive tax forms from each provider. If you did not make any contributions to or distributions from your HSA during the tax year you will not receive tax forms from your HSA provider(s).
Of course, if you have specific questions about what forms you need and your specific situation, consult with your tax professional.
IRS Form 5498-SA
Form 5489-SA is used to report total contributions made to your HSA for the tax year. It will be provided to you by your HSA custodian by May 31st. While you don’t need this form to file your tax return, it’s handy to confirm your contribution amount and to keep it in case you get audited.
IRS Form 1099-SA
Form 1099-SA form is used to report total distributions made from your HSA for the tax year. It is also used to report any excess contributions you removed. Again, it will be provided to you by your HSA custodian by May 31st. You will need this form to help you fill in Form 8889. You will not get this form if you didn’t make any withdrawals from your HSA.
Additional required federal tax forms
IRS Form 8889
Form 8889 is a form you must complete to report contributions, distributions, and tax deductions related to your HSA. You can use the info on Forms 5498-SA, 1099-SA, and W-2 to help you fill this out. You’ll attach this to Form 1040 to file it with the IRS.
IRS Form 5329
If you made excess contributions to your HSA, and you did not remove them before April 15th, you must fill out Form 5329 and submit it with Form 1040. Only complete and file this form if it’s applicable to your situation.
IRS Form 1040
This is your individual income tax return. You must attach Form 8889 to your Form 1040 (and Form 5329, if applicable). If you made an excess contribution to your HSA, you must also report this in the “other income” field of your Form 1040.
IRS Form W-2
Your W-2 is a wage and tax statement from your employer. Along with your wages and taxes withheld, this will show HSA contributions made by you and your employer during the year. You can look for them in Box 12-W. If you made contributions outside of payroll, those won’t show up on your W-2.
State tax forms
HSAs are exempt from federal tax and most state taxes, but not all. Some states tax HSA contributions, and some tax HSA earnings. For states that do not tax individuals on income, an HSA may not have an impact on your income when filing your state tax forms. Below is a list of states that tax HSAs in some way. While this can be a helpful resource, we do always recommend checking the laws in your area to ensure you follow the rules appropriately.
- California: HSA contributions, interest, and capital gains are subject to state income tax.
- New Jersey: HSA contributions, interest, and capital gains are subject to state income tax.
Filing correctly is worth the effort
While tax filing related to your HSA may seem daunting, it is worth it to do your taxes correctly and take advantage of the many tax benefits of an HSA. Not only does an HSA allow you to save tax-free money for medical expenses in the near-term, it also allows you to save money for retirement in the long-term. HSAs can be a valuable part of your financial plan, and getting your HSA taxes squared away will put you on a path to success.
The ultimate checklist
It's always important to know what you will you need to file your taxes. In order to help you get prepared, Lively has created this checklist to help you get organized with all the HSA tax forms you will need.
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If you are ready to open an HSA to help reduce your tax burden and start saving today, Lively's HSA is easy to use and offers unparlelled customer support during tax season, open enrollment, and all year long.
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.