HSA tax benefits
It's always good to remember the HSA triple-tax benefit, which can be handy information when you file your taxes.
- Reduce taxable income - HSA contributions through payroll are made pre-tax, which lowers tax liability on paychecks. Manual contributions are tax deductible when filing taxes each year.
- Tax-free earnings - Interest growth earned on HSA funds is never taxed.
- Tax-free distributions - HSA funds are not taxed when used for eligible expenses.
How much can I contribute to my HSA?
The IRS does set up annual contribution limits so only a certain amount of money is eligible to claim these benefits.
The table below displays the current HSA contribution limits. Current contribution information can be found on the U.S. Department of Treasury website at treas.gov.
|Tax Year||Individual Coverage Limits||Family Coverage Limits|
|2021||not yet announced||not yet announced|
Once age 55, members can contribute an additional $1,000 towards their HSA (either individual and family coverage).
Can I still make HSA contributions for the last tax year?
If you haven't maximized your contributions yet, you can make contributions for 2019 through April 15, 2020. To make a contribution, just log into your account at www.carefirst.com/myaccount and click Make a Deposit to transfer funds directly from your bank account. Or, send a check with a contribution form to Further.
How much have I already contributed for the current year?
Log in to see your most recent statement. Your statement should include how much you've contributed for 2020.
Sign in at www.carefirst.com/myaccount and select your spending account profile.
Choose the Accounts tab and click on Statement to generate a tax year statement.
What if I over-contributed to my HSA?
Any contributions over the IRS’s limit for the year are excess contributions. A six percent excise tax is imposed on the account holder for excess individual or employer contributions for each tax year.
If an upcoming employer contribution will go over the limit, you must make every reasonable effort to notify your employer before the contribution is made.
If excess contributions have been made, you won’t pay a six percent excise tax on the excess amount if you:
- Withdraw the excess contributions by the due date of your tax return and
- Withdraw any earnings on the withdrawn contributions and include the earnings in “other income” on your tax return for the year
To withdraw the excess contribution, sign into your account at hellofurther.com and click Submit a Claim. Choose HSA Withdrawal Request and the distribution type Excess Contribution. Further will compute the taxable earnings on the excess contributions for you on your next 1099-SA IRS reporting. If contributions are made with pretax dollars, then both the withdrawal and the earnings are included in your taxable income.
What documentation do I need for my HSA when I file my taxes?
You will be mailed two forms each year:
- Form 1099-SA reports any withdrawals made in a tax year by January 31 each year.
- Form 5498-SA by May 31 each year reports contributions made for a specific tax year.
You are responsible for keeping records to support withdrawals and to complete Form 8889 and attach it to Form 1040 when you file your taxes.
Hang on to your receipts from HSA purchases. You don't need to submit your receipts when you file your taxes but the IRS does require you to hold on to your receipts for seven years in case you are audited.
If you have any questions, call CareFirst customer service at Toll Free: 866-758-6119.