How Are Employer Contributions to an HSA on a W-2?
Clarify how employer HSA contributions appear on your W-2. Learn about the tax implications and the necessary reporting steps for an accurate tax return.
A Health Savings Account (HSA) is a tax-advantaged savings account for healthcare expenses, available to those with a high-deductible health plan. Both employees and employers can contribute to an HSA, and employer contributions are a common benefit. These contributions have specific reporting requirements on an employee’s annual Form W-2. Understanding how these contributions are reported is important for filing your taxes correctly.
Locating HSA Contributions on Your W-2
On your Form W-2, the total amount of HSA contributions for the year is in Box 12. This box reports various types of compensation and benefits, each identified by a code. The designated code for Health Savings Account contributions is “W”.
The figure with code W represents the combined total of all contributions made to your HSA through your employer’s payroll. This includes funds your employer contributed as a benefit and any contributions you made through pre-tax payroll deductions.
This amount is for informational purposes and is not included in your taxable wages. The value with code W has already been excluded from the figures reported in Box 1 (Wages, tips, other compensation), Box 3 (Social Security wages), and Box 5 (Medicare wages).
Tax Implications of Employer Contributions
When an employer makes contributions to an employee’s HSA, these funds are excluded from the employee’s gross income for federal tax purposes. This means the money is not subject to federal income tax, providing an immediate tax savings.
This tax-favored status also applies to payroll taxes. The amounts contributed by an employer are not subject to Social Security and Medicare taxes, known as FICA taxes. This makes employer HSA contributions an efficient form of compensation.
While these contributions are exempt from federal taxes, the treatment can differ at the state level. Most states follow federal guidelines and also exclude these contributions from state income tax. However, a few states do not conform to federal rules, and employer contributions may be considered taxable income.
Required Tax Filing with Form 8889
When filing your annual income tax return, you must use the information from your W-2 to complete IRS Form 8889, Health Savings Accounts (HSAs). This form is a required attachment to your Form 1040. It is used to report all contributions to your HSA, calculate your allowable HSA deduction, and report any distributions from the account.
You must transfer the amount reported on your W-2 in Box 12 with code W directly onto Line 9 of Form 8889, which is for “Employer contributions”. This step informs the IRS of the funds contributed through your employer’s plan.
Form 8889 is also where you report any after-tax contributions made directly to your HSA. After completing the form, you will calculate your total HSA deduction on Line 13. This deduction amount is then transferred from Form 8889 to Schedule 1 of your Form 1040, where it reduces your adjusted gross income.
Verifying Contribution Amounts
Before filing your tax return, verify that the HSA contribution amount on your W-2 is accurate. Compare the figure in Box 12, Code W, to your final pay stub of the year. Your year-end pay stub should provide an itemized breakdown of your pre-tax HSA contributions and any contributions made by your employer.
You should also check the total contributions against the annual limits set by the IRS. For 2025, the contribution limit is $4,300 for self-only coverage and $8,550 for family coverage. Individuals age 55 or older are permitted an additional $1,000 catch-up contribution.
If you discover a discrepancy, contact your employer’s human resources or payroll department. They can review their records and issue a corrected Form W-2c if an error was made. Resolving inaccuracies before you file helps ensure your tax return is correct.