How to Claim the Federal Tax Deduction for an HSA Contribution

by Mark Kennan

    Health savings accounts help you save for future medical expenses in a tax-sheltered account. Eligible contributions aren't included in your taxable income, you get to take tax-free distributions for qualified expenses and you employer can even contribute on your behalf. You have to file extra forms to claim the deduction, but it is worth it to save the money on your taxes.

    Deductible Contributions

    Only contributions that you make to your HSA out-of-pocket are deductible on your tax return. Contributions that your employer makes on your behalf aren't included in your taxable income to begin with, so you don't claim a deduction for them on your federal income tax return. You can see the contributions that your employer makes for you in Box 12 of your Form W-2, marked with the code "W."

    Included Contributions

    The end of the calendar year doesn't mean the end of your chance to contribute to an HSA for that tax year. Instead, the Internal Revenue Service allows you to continue to make contributions up to the tax filing deadline. For example, contributions for the 2012 tax year can be made up until April 15, 2013, so if you put money in your HSA in January 2013 and designate it for the 2012 tax year, you can deduct it on your 2012 tax return.

    Tax Reporting

    To claim a deduction for your HSA contributions, you have to first complete Form 8889. Include both the contributions you made and the contributions made by your employer. The amount you can deduct appears on Line 13. When you fill out your Form 1040, report the deduction on Line 25. If only your employer contributed to your HSA during the year, you don't have to complete Form 8889 because you don't get a deduction.

    Excess Contributions

    If you are looking for extra deductions as tax-time comes around, you might not be able to contribute more to your HSA. Your contributions and your employer's contributions are combined for the purposes of the annual contribution limit. The annual limit changes from year to year and varies depending on whether you have individual coverage or family coverage. For example, if your limit is $3,200 and your employer put in $3,000 on your behalf and you've already put in $200, you can't contribute any more. If you do, you'll have to pay a 6 percent excess contributions penalty.

    Photo Credits

    About the Author

    Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

    Zacks Investment Research

    is an A+ Rated BBB

    Accredited Business.