State Tax Treatment of Health Savings Accounts
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Health Savings Accounts offer generous deductions on Federal income tax for any deposits made to the account. Most states also offer the same deductions on state income taxes. However, since Health Savings Accounts were set up as a federal program, the individual states can choose to comply with the federal guidelines concerning tax treatment of HSAs, or establish their own rules.
Federal HSA Tax Treatment
States Following Federal HSA Tax Treatment
These states offer deductions on state income taxes for contributions to Health Savings Accounts.
States That Fully Tax HSAs
States That Tax Contributions, Interest, and Capital Gains
States that have indicated that they must pass state legislation before Health Savings Accounts will receive a tax benefit at the state level.
These two states consider any interest or capital gains you earn in your HSA as taxable income, and do not allow you to deduct contributions on your state tax return.
No State Taxes on HSAs
No State Taxes on Health Savings Accounts
States not affected by federal income tax guidance
These states do not tax individuals on income, thus there is no income tax deduction when contributing to your HSA.
Dividends & Interest Tax on HSAs
Dividends and Interest Tax on HSA Accounts
These states do not tax income, and thus there is no state income tax deduction when contributing to an HSA. They do tax dividends and interest on HSA accounts if you make a taxable withdrawal from your account.
*In New Hampshire you must report these earnings if they amount to over $2400 filing individually, or $4800 if married filing jointly.
**In Tennessee you must report your dividend and interest earnings if they total over $1,400 for the year, or $2500 if you are married filing jointly.
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- Your state of residence
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