Do I Need to File Form 8889 for My HSA Contributions?

Health Savings Accounts (HSAs) offer tax advantages for medical expenses but come with IRS reporting requirements. If you contributed to or withdrew from an HSA in a given tax year, you may need to file Form 8889 with your federal tax return. Failing to do so could result in penalties or unexpected taxes.

Who Must File Form 8889

Anyone with an HSA during the tax year may need to file Form 8889. The IRS requires this form for individuals who made contributions, had employer contributions deposited on their behalf, or withdrew funds. Even if no withdrawals were made, reporting is necessary if contributions occurred.

Employer contributions, often part of workplace benefits, must also be reported. These amounts are excluded from taxable income but count toward the annual contribution limit. For 2024, the IRS set the maximum HSA contribution at $4,150 for individuals and $8,300 for families, with an additional $1,000 catch-up contribution for those 55 and older. Contributions exceeding these limits may be subject to a 6% excise tax unless withdrawn before the tax deadline.

Taxpayers who inherit an HSA may also need to file Form 8889. If the beneficiary is a spouse, the account remains an HSA under their name. If the beneficiary is not a spouse, the account ceases to be an HSA, and the fair market value of the funds becomes taxable income in the year of the original owner’s death.

Reporting HSA Contributions

Form 8889 requires taxpayers to report all contributions made during the tax year, including those by the individual, an employer, or through a cafeteria plan. The IRS uses this information to ensure contributions do not exceed annual limits and to determine tax benefits.

Line 2 of Form 8889 asks for total contributions made by the account holder, excluding employer contributions. This includes personal deposits made throughout the year, whether as a lump sum or periodic transfers. Contributions made between January 1 and the tax filing deadline (typically April 15) can still be allocated to the prior tax year if designated as such when deposited.

Employer contributions, reported separately on Line 9, are not included in taxable income but must still be disclosed. These amounts also appear on an individual’s W-2 in Box 12 with code W. If an employer contributes more than the allowable limit, the excess must either be returned before the tax deadline or included in taxable income.

Individuals 55 or older by the end of the tax year can make an additional $1,000 catch-up contribution, reported on Line 3. Unlike standard contributions, catch-up contributions are only available to the HSA owner. A married couple with separate HSAs can each make their own catch-up contributions but cannot combine them into one account.

Handling HSA Distributions

Withdrawals from an HSA must be documented to ensure they are used for qualified medical expenses, such as doctor visits, prescriptions, and dental treatments. If funds are spent on non-medical items or services, the withdrawal becomes taxable and is subject to a 20% penalty unless the account holder is 65 or older, disabled, or deceased.

HSA custodians issue Form 1099-SA, which details the total amount withdrawn during the tax year. This information is recorded on Form 8889, with Line 14a reflecting the total distribution and Line 15 accounting for the portion used for qualified expenses. Any amount spent on non-qualified expenses must be reported on Line 16 and included in taxable income. While the IRS does not require receipts with the tax return, maintaining detailed records is essential in case of an audit.

HSA funds do not have to be used in the same year they are contributed. Account holders can save and reimburse themselves for past medical expenses, provided they keep proof of the original expense and that it was incurred after the HSA was established. This allows individuals to maximize tax-free growth while strategically timing withdrawals.