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HSA reported in less common income. Is the software including it in taxable income?

I just filed my taxes. Upon review, I see the HSA income reported as 'less common income'. I know HSA income is not taxable, and I believe TurboTax does include it in taxable income. Can someone confirm it?

If not I will need to know how to delete HSA income from Less Common Income category and file an amendment.

Thanks,

Stephen

1 Comment
TurboTax Specialist

HSA reported in less common income. Is the software including it in taxable income?

There is a link to the HSA interview under Less Common Income on the Wages & Income menu (or Personal Income for Home & Business). There is also a number to the left of the Start or Update button on this line.

 

This numbers is the total of all the distributions made from your HSA(s). This number is normally NOT taxable, but I understand your confusion.

 

You can see if this number is taxable by looking at page 1 of your 1040. If you have the online product, you can look at Tax Tools on the left, then click on Tools, then click on View Tax Summary in the box that appears, then, back on the left, click on Preview My 1040. If anything from the HSA was taxable, it would appear on Line 21 with the description "Health Savings Accounts" or something like that.

 

If you have the desktop software, you can go into Forms mode and look at the 1040 as well.

 

The distributions can be taxable if you took them out of the HSA for reasons other than to pay for qualified medical expenses. And, of course, if you made an excess contribution which you withdrew before the due date, this would show up on Line 21 also (I don't know if it would appear on the Wages & Income menu).

 

Contributions to the HSA are not normally taxable - EXCEPT in TurboTax they appear to be taxable until you answer the question in the HSA interview  that you have HDHP coverage, at which point, they are subtracted from income again (if the contributions were on your W-2).

 

Hopefully, you will look at line 21 and not see any HSA stuff there, and you can declare victory.