How are HSA contributions treated for tax/payroll purposes?
HSA contributions can be made pretax unless you are dealing with an individual or an employer who does not have a Section 125 Plan or Premium only Plan document that allows these dollars to be deducted on a pretax basis. Even in the event that one of the situations above is the case an HSA account holder can still make an HSA contribution post tax and then deduct it from their W2 at the end of the year. HSA contributions are entirely tax free on a Federal basis in all states (whether those contributions are made by an employer or employee). At this time a hand full of states, including California do not follow Federal tax guidelines and State taxes still apply. Technically HSA contributions through a 125 cafeteria plan by salary reduction are treated as employer contributions – that is why they are excluded from income and wages. While most people consider salary reduction amounts as employee contributions , technically, this is not the case – they are reported as employer contribution
HSA contributions can be made pretax unless you are dealing with an individual or an employer who does not have a Section 125 Plan or Premium only Plan document that allows these dollars to be deducted on a pretax basis. Even in the event that one of the situations above is the case an HSA account holder can still make an HSA contribution post tax and then deduct it from their W2 at the end of the year. HSA contributions are entirely tax free on a Federal basis in all states (whether those contributions are made by an employer or employee). At this time a hand full of states, including California do not follow Federal tax guidelines and State taxes still apply. Technically HSA contributions through a 125 cafeteria plan by salary reduction are treated as employer contributions – that is why they are excluded from income and wages. While most people consider salary reduction amounts as “employee contributions”, technically, this is not the case – they are reported as employer contributio
