Understanding Your HSA Tax Forms

You’re probably getting your HSA tax forms right about now.  So, do you remember what to do with them?

This article will show you what principle tax forms you can expect to receive as a health savings account owner, as well as what tax forms you should expect to file in order to get the most benefit out of using an HSA. 

Your HSA-Related Tax Forms At-A-Glance

• Form 1099-SA: Used to report distributions from an HSA
• Form  5498-SA: Used to report contributions to an HSA
• Form 8889: to report your HSA contributions and distributions
• Form W-2: A form you will receive from your employer, if any, which includes amounts contributed to an HSA on your behalf. 

Here’s a look at these forms in more detail. 

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Form 1099 SA

An IRS Form 1099-SA is a tax form that reports distributions made from a Health Savings Account (HSA) during the tax year.

It contains information such as the total amount distributed, any earnings on those distributions, and any contributions made to the HSA during the year.

Who gets a Form 1099 SA?

The form is only sent to people who had HSA withdrawals during the prior plan year. If you didn’t make any HSA withdrawals during the prior tax year.

What’s included on an IRS Form 1099 SA?

The 1099 SA tax form also includes codes that indicate whether or not the distributions were used for qualified medical expenses or if they were subject to penalties or taxes.

If you only withdrew HSA money to pay for eligible expenses, you won’t owe taxes or penalties on the amount withdrawn. That’s one of the huge benefits of using an HSA: Because your contributions (or your employers’ contributions, if any) were made with pre-tax dollars, you are essentially paying for health care entirely with tax-free dollars.

That effectively amounts to quite a discount on medical care and services when you use a health savings account to pay for medical care rather than use your own savings.

Otherwise, your withdrawals will be taxable as ordinary income. If you are under age 65, these withdrawals for nonqualified expenses will be subject to a penalty of 20%.

Form 1099 SA Boxes

IRS Form 1099 SA contains the following “boxes,” which help to organize and standardize the information on them. Here are the boxes and what they contain:

Box 1 – Gross Distributions

The amount in Box 1 of your IRS 1099 SA should reflect all the distributions made during the previous tax year from all health savings accounts. That includes amounts distributed to pay for your own medical expenses, as well as those of your spouse and any dependents.

This includes both withdrawals made via the HSA’s linked debit card, as well as any withdrawals made by authorized and designated individuals acting on the HSA owner’s behalf, if applicable.

This number should match the number on Line 14a of IRS Form 8889, discussed below.

Box 2 – Earnings on Excess Contributions

Normally, the money you hold within an HSA grows tax-deferred, as long as it’s in the account. But if you have made excess contributions to an HSA, the earnings attributable to those excess contributions in your HSA are taxable as ordinary income.

The amount of earnings on excess contributions will be included in the gross distribution amount in Box 1.

Box 3: Distribution Code

Any distributions you receive from your HSA will be assigned one of these codes: 

• Code 1 (Normal): Eligible, qualified medical expenses
• Code 2: Excess. For example, an excess contribution
• Code 3: Disability (See IRC Section 72(m)(7))
• Code 4: Death distribution
• Code 5: Prohibited transaction
• Code 6: Death distribution

You’ll note that there are two separate codes for death distributions: Code 6 is for distributions made after the year of death to a non-spouse beneficiary. Code 4 is for distributions to a deceased account holder’s estate during or after the year of death.

Oddly, expenses that are not qualified, like buying a couch, show up lumped together with qualified expenses, like seeing a doctor. So you may have to double check your transactions and make sure your qualified transactions are captured and documented on your personal income tax return.

If your Form 1099 SA lists any transactions as non-qualified that in reality were qualified withdrawals as defined in IRS Publication 502 – Medical and Dental Expenses, you should complete an IRS Form 8889 to correct the error and send it to the IRS.

Box 4: FMV on Date of Death

FMV stands for “fair market value.” This is the value of the assets in the HSA as of the date of death of the account owner. You won’t need to worry about this amount unless you’ve inherited an HSA or you are handling the affairs of the deceased.

Box 5: Checkbox

This box will be checked to indicate whether the form contains information from an HSA, Archer Medical Savings Account, or Medicare Advantage Medical Savings Account. 

Form 5498-SA – Contribution Report

Form 5498-SA is used by HSA custodians to report contributions made to HSAs during the tax year.

The form includes information about contributions made by both individuals and employers, as well as any rollovers or transfers into the account. This information is important at tax time because it determines your eligibility for certain deductions and credits related to health care expenses.

The tricky bit with IRS Form 5498-SA is that taxpayers normally don’t receive this form in the mail until after the tax filing deadline.

However, if your employer contributed to your HSA during the previous tax year, you should be able to find that information on your W-2 form.

IRS Form 5498 SA Boxes

Box 1: Archer MSA contributions. You won’t have to worry about this box unless you have made contributions to an Archer Medical Savings Account.

Box 2: Total Contributions Made in 2023. This box should include all your contributions for HSAs or Archer MSAs made during 2023 for tax year 2022 or 2023. This box does not include rollover contributions. Box 2 also includes qualified HSA funding distributions (trustee-to-trustee transfers from an IRA to an HSA under section 408(d)(9)) received by you during 2023. 

Box 3: Total HSA or Archer MSA Contributions Made in 2024 for 2023. Self-explanatory.

Box 4: Rollover Contributions. Includes all amounts your HSA or Archer MSA received via rollover, as opposed to your own direct contribution or employer contribution. This amount is not included in Box 2.

Box 5:  Fair Market Value of HSA, Archer MSA, or Medicare Advantage MSA. FMV of the account as of the end of the year.

Box 6: Checkbox. Indicates if this account is an HSA, Archer MSA, or MA MSA.

For Further Reading: IRS.gov: Instructions for Forms 1099-SA and 5498-SA

IRS Form 1040 Line 25

IRS Form 1040, Line 25 is where you claim your deduction for your HSA contributions for the previous tax year.

HSA contributions are an “above the line” deduction. That means you don’t need to itemize expenses to benefit from contributing to an HSA. You can take the deduction on top of your standard deduction for the year.

Note: Do not include pre-tax contributions or pre-tax payroll deferral here. That is, don’t include workplace contributions either from your own payroll deduction or from your employer. Your employer will exclude them from your income on your W-2. 

These amounts should appear in Box 12 of your W-2 with Code W.

For Further Reading: IRS.gov: Form 1040 Instructions

Form 8889 – Health Savings Accounts

IRS Form 8889 – Health Savings Accounts, is the form you need to use to document your deductions on Form 1040.

If you contributed money or took money out of your Health Savings Account during the previous year, you need to attach IRS Form 8889 to your federal tax return when you file your taxes. 

Form 8889 is divided into three parts: Part I, where you report all HSA contributions and compute your HSA deduction; Part II, where you report all HSA distributions; and Part III, which is about the income and additional tax for failure to maintain High Deductible Health Plan (HDHP) coverage, known as the testing period.

Your contributions are detailed on line 1 through 13 (Part I) of Form 8889. The contributions you make are reported on line 2 of your Form 8889. 

Those entries determine what you need to report on Line 25 on your individual federal tax return, Form 1040. 

Usually, what your employer contributes to your HSA is pre-tax.  It’s not included as taxable income on your W-2, so you cannot deduct it on the 1040.

Part II (lines 14 through 17) of the 8889 validates whether your HSA withdrawals are for qualified health care. On line 15, enter the amount of eligible expense withdrawals. If the amount doesn’t match the amount on your IRS Form 1099-SA total HSA distribution, you’re looking at taxes on non-qualified withdrawals. If you’re under age 65, you will also face a 20-percent penalty on any non-qualified withdrawals. 

Reporting Distributions from your HSA

You report distributions from your HSA in Part II of your Form 8889. Line 14a asks for your total distributions. On Line 15, you list the distributions you used for qualified medical expenses, which are tax-free. On Line 16, you list the distributions used for non-qualified expenses, which will be subject to income tax and possibly a 20% penalty, reported on Line 17.

For Further Reading: IRS.gov: Form 8889 Instructions

Here are some additional articles on Health Savings Accounts: April 15 is Almost Here – Maximize Your HSA Contribution! | HSA Frequently Asked Questions

Here are some additional pages related to this article: Maximize your HSA Newsletter | Free HSA Special Report

Note: HSA For America does not provide tax advice. This article is for general information only, and should not be construed as specific tax advice. For information and advice about your specific information, you should consult with a qualified tax profession. 

Frequently Asked Questions about HSAs and Taxes

Q: What is a Health Savings Account (HSA)?

A: An HSA is a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. It’s available to those enrolled in a high-deductible health plan (HDHP).

Q: What are the tax advantages of an HSA?

A: There are three primary tax advantages to an HSA: contributions are tax-deductible, the growth within the account is tax-free, and withdrawals for qualified medical expenses are also tax-free.

Q: What is IRS Form 8889 and who should file it?

A: IRS Form 8889 is used to report any contributions and distributions associated with a Health Savings Account (HSA). You must file Form 8889 if you (or someone on your behalf, including your employer) made contributions to your HSA, you received HSA distributions, or you failed to remain eligible for the HSA during the testing period and must include certain amounts in income.

Q: How is the ‘Last-month rule’ reflected in Form 8889?

A: The last-month rule states that if you are covered by an HDHP on the first day of the last month of your tax year (December for most taxpayers), you are considered an eligible individual for the entire year. It is reflected on Line 3 where you can contribute up to the maximum for the year. However, you must stay in the HDHP for a testing period, generally the next 12 months.

Q: Do I need to file Form 8889 if I didn’t have any HSA activity during the year?

A: If you did not have any contributions or distributions during the year, and the last-month rule does not apply to you, then you generally do not need to file Form 8889.

Q: What should I do if I made a qualified funding distribution from my IRA to my HSA?

A: You report a qualified funding distribution from your IRA to your HSA on Form 8889, Line 10. This distribution is not included in your income, is not deductible, and reduces the amount that can be contributed to your HSA.

Q: What happens if I used my HSA funds for a non-qualified expense but then paid back my HSA?

A: If you mistakenly used HSA funds for a non-qualified expense but then repaid the HSA before filing your tax return, you do not need to report the transaction as a distribution on Form 8889. Therefore, it will not be subject to income tax or penalties.

Q: What happens if I use my HSA funds for non-qualified medical expenses?

A: If you use your HSA funds for non-qualified expenses and you are under age 65, you will need to pay income tax on the distribution plus a 20% penalty. These non-qualified distributions should be reported on Form 8889, Line 16, and Line 17.

Q: Can I claim a tax deduction for HSA contributions made by my employer?

A: No, employer contributions to your HSA are made pre-tax and thus, are not deductible by you. They are excluded from your gross income.