Does Georgia Offer Tax Deductions for High Deductible Health Plans?

Health care costs can be a financial burden, and many individuals use high deductible health plans (HDHPs) with Health Savings Accounts (HSAs) to manage expenses. While HSAs offer federal tax advantages, state tax treatment varies.

For Georgia residents, understanding whether HSA contributions qualify for state tax deductions is essential for maximizing savings.

Eligibility Considerations

Not all health plans qualify as HDHPs. The IRS sets annual criteria based on deductible and out-of-pocket limits. In 2024, an HDHP must have a minimum deductible of $1,600 for self-only coverage and $3,200 for family coverage, with out-of-pocket maximums of $8,050 and $16,100, respectively. Only plans meeting these thresholds allow HSA contributions.

To contribute to an HSA, individuals cannot be enrolled in Medicare, covered by a non-HDHP health plan, or claimed as a dependent. Employer-provided benefits like flexible spending accounts (FSAs) or health reimbursement arrangements (HRAs) may also affect eligibility.

Contribution Limits

The IRS sets annual HSA contribution limits, adjusting them for inflation. In 2024, the maximum is $4,150 for self-only coverage and $8,300 for family coverage, including both personal and employer contributions.

Individuals 55 and older can contribute an additional $1,000 as a catch-up contribution. Exceeding the limit results in a 6% excise tax on excess amounts each year they remain in the account. To avoid penalties, excess contributions should be withdrawn before the tax filing deadline.

Georgia Tax Deductions

Georgia follows federal tax treatment for HSAs, meaning contributions deducted on a federal return also reduce state taxable income. Since Georgia uses federal adjusted gross income (AGI) as the starting point for state taxes, HSA contributions automatically lower state taxable income.

Unlike some states, Georgia allows tax-deferred growth and tax-free withdrawals for qualified medical expenses. Interest, dividends, and investment gains within an HSA are not subject to state income tax. Rollovers and transfers between HSAs remain tax-advantaged.

Coordination with Employer Plans

Employer contributions count toward the annual HSA contribution limit. If an employer deposits $1,000, the employee must ensure personal contributions do not exceed the remaining allowable amount.

Some employers offer wellness incentives, such as additional HSA contributions for completing health assessments or preventive care programs. These incentives increase HSA balances but still count toward the IRS limit.

Employer contributions are typically pre-tax, reducing taxable wages. Personal contributions made independently can still be deducted but do not lower payroll taxes.

Documentation for State Returns

Proper documentation is necessary when claiming HSA deductions on Georgia state tax returns. Since Georgia follows federal tax treatment, taxpayers should ensure their records align with IRS requirements.

IRS Form 8889 details contributions, distributions, and excess amounts. This form, submitted with the federal tax return, serves as the basis for state tax calculations. While Georgia does not require a separate HSA-specific form, taxpayers should retain copies of Form 8889, W-2 forms showing employer contributions, and bank statements reflecting personal deposits. These documents verify contributions were within limits and withdrawals were used for eligible medical expenses.