American Fidelity HSA

[daltonthecooler]

I have an American Fidelity Health Savings Account through work.  Between my employer and I there was only $2595 in contributions toward 2016.  Through this forum and other resources I have realized the triple tax savings of an HSA and want to max it out going forward.  With that being said, I have until April 15th to contribute the max towards last year.  My question is how does this effect income taxes?  My prior contributions were payroll deduction and were deducted pre-tax from income and FICA (soc sec & medicare) taxes.  I can perform an online transfer and contribute the rest of the max this year.  Will my non-payroll contribution be easy to deduct on my income taxes?  Also, will I receive the FICA tax deduct (I don’t pay into soc security, just medicare because I have a pension)?   Thanks for your help. 

[dandarc]

You'll save income taxes but not FICA on any contributions that didn't go through payroll.

[daltonthecooler]

You'll save income taxes but not FICA on any contributions that didn't go through payroll.

Thanks for the reply.  That's what I figured I just didn't know if it would be complicated since some of my contributions were already taxed and others were not.  I appreciate it

[Nothlit]

Yes, it's pretty straightforward. But just to further clarify... you'll indicate your after-tax contribution on Form 1040, line 25 (health savings account deduction). The pre-tax contributions that were made through payroll deduction don't show up as a distinct line item on Form 1040 as they have already been subtracted from your W-2 wages.

On Form 8889, after-tax contributions will be entered on line 2. Pre-tax payroll contributions (both employer & employee, even though the description only says "employer contributions") are indicated on line 9.

So, assuming you are single and are therefore limited to $3350 in total contributions, if you make an additional $755 in after-tax contributions for 2016, you'd end up with the following entries:
1040, line 25: $755
8889, line 2: $755
8889, line 9: $2595

I am not a professional tax preparer, so don't take this as official tax advice, but I made the same mistake my first year with an HSA, not realizing the FICA tax benefit of payroll deduction. So my return from that year looks pretty similar to the example above. At least in your case, you're only out the Medicare tax of 1.45% on $755...or $10.95. :)

[daltonthecooler]

Thanks for the thorough reply and aiding my understanding of this.  This helped ease my mind of getting the income tax deduction (it'll be $4100 because I'm on a family plan).  Based on reading more into this and looking back at last years return everything seems to align with your post.  Thanks for pointing me in the right direction.