Should I include my employer's HSA contributions on Line 21 (Other Income)?
Ah, tax season. I have an issue. My medical deductible is 00 USD a year. My employer contributes 00 to an HSA account, and it shows up on my W-2 box 12. The main question is, does this amount go into line 21 (other income) on 1040?
If it does, and I fill out out form 8889, the maximum contribution for family income is 50. Later, I am instructed to subtract the employer contributions (00), for a difference of 50, which is used on line 25 (HSA deduction) of 1040. Basically that would add 50 to my taxable income, which is not my understanding of how HSAs work.
Cheers
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Generally, no, you do not include the amount your employer contributed to your HSA as "other income" on line 21. Because it is not added to your income (not included on Box 1 of your W-2 or on line 21), you do not deduct it on line 25, either.
In the Form 1040 instructions for Line 21, you'll see several references to the HSA and different circumstances where you need to add income here related to the HSA. However, your employer's contributions to your HSA are not taxable as long as you were an eligible individual for the HSA and did not exceed the contribution limits.
Form 8889 is required for anyone who contributed to or withdrew (received distributions) from an HSA. Because your employer made contributions and you used your HSA debit card, you will need to file Form 8889. You should have received a 1099-SA form that showed the amount you took out of your HSA.
Based on your comment above, I believe that you are filling out your Form 8889 Part I incorrectly. Line 2 should only include HSA contributions that you made to your HSA directly, and should not include any amount that your employer put in or any that you contributed through your paycheck. Based on your comment, Line 2 should be [CO].
Line 3 will be 50, and Line 9 is where you enter your 00 that your employer contributed. Line 12 will have the 50 number you had, but when you get down to Line 13, the smaller of Line 2 or Line 12 will be [CO], meaning that you have no deduction to put on your Form 1040 Line 25.
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