Adding my HSA distributions for tax year 2023 increased "Federal Tax Due" about $250 (box checked indicating HSA funds used for qualified expenses). This make sense?

Forum|Forum|2 years ago
March 14, 2024
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TurboTax Online

BillM223

Don't watch the Refund Meter too closely.

When you added the 1099-SA, that amount, according to the IRS, is taxable until you indicate that it was for qualified medical expenses. Go all the way to the end of the HSA interview and see if that amount is still in Federal Tax Due.

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bob-reichert-livAuthor

Hi Bill,

Thanks for the reply.

I checked the box indicating the funds were used for authorized medical expenses. I also checked the form (used the turbotax "View pull down tab") to see the the box on 1099-SA in turbotax has the box checked indicating the funds were used for qualified medical expenses (it is checked).

I am basically done with my taxes (all data entered and can submit).

I decided to do one last review. I changed the HSA distribution amount to see if it influenced my MAGI. I reduced the HSA distribution I received drastically. I figured the amount of tax owed should not change. It did (taxes owed go up when I increase the HSA distribution, and go down when I decrease the distribution). MAGI does not change.

In the "Summary form", it looks like I might owe a tax penalty. Increasing the HSA distribution also increases the tax penalty. Seems like my HSA distribution from 1099-SA is being treated as taxable income. Maybe I'm pressing (or not pressing) the correct button?

Any thoughts??

Thanks!