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Lesson 1 of 5
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HSA Basics

What is an HSA?

 An HSA is a way to save for medical expenses and reduce your taxable income.  

An individual qualifies for an HSA *only* if they have a high deductible health plan (HDHP). An HDHP has:  

A higher annual deductible than typical health plans, AND  A maximum limit on the sum of the annual deductible and out-of-pocket expenses that you must pay for covered expenses.

Out-of-pocket expenses include copayments and other amounts, but do not include premium amounts.  

Deductible thresholds for HSA’s  $1,400 for self-only coverage  $2,800 for family coverage

How to identify if a taxpayer has an HSA

 See Part V, Question 1 on the Intake and Interview Form

Keep in Mind

 Taxpayers often miss this question on the intake and interview form, or they may not be aware that they have an HSA. If the taxpayer has any of the forms below, it is likely the taxpayer had an HSA for at least some part of the year. Be sure to correct the intake form as appropriate.

 The taxpayer or spouse has a Form W-2 with a box 12 entry CODE W  

The taxpayer or spouse has a Form 1099-SA with an amount in box 1 and the HSA box checked in box 5  

The taxpayer or spouse received a Form 5498-SA for HSA contributions

HSA Documents

Form W-2, Box 12: Indicates the taxpayer made contributions to their HSA through their payroll system at work. These contributions do not need to be reported elsewhere in TaxSlayer.

Form 5498-SA: Reports a taxpayer’s total contributions to an HSA  Only the taxpayer’s contributions (not the employer’s contributions) can be taken as an adjustment to reduce taxable income  Deduction appears on Schedule 1, Part II, Line 12. Total adjustments reported on Form 1040, line 8A

Form 1099-SA: Reports the total distributions taken out of the HSA during the year.  Distributions taken out are tax-free if used towards qualified medical expenses. However, if they are used for nonqualified medical expenses, they will be taxed as “Other Income.”

We will cover each of these documents in more depth in the next lesson.