Are Payroll Deducted HSA Contributions Used for Adjusted Gross Income?

When it comes to HSA (Health Savings Account) contributions, one common question that arises is whether payroll deducted HSA contributions are used for adjusted gross income. The short answer is no, payroll deducted HSA contributions are not considered part of your adjusted gross income.

Here's a breakdown of how HSA contributions impact your taxes:

• Payroll deducted HSA contributions are made on a pre-tax basis, which means the money is taken out of your paycheck before taxes are calculated.
• Since these contributions are made with pre-tax dollars, they are not included in your adjusted gross income.
• Contributions made with after-tax dollars, such as those made outside of payroll deductions, can be deducted from your gross income on your tax return.

It's important to keep in mind that HSA contributions do have annual limits set by the IRS. For 2021, the limit for individuals is $3,600 and for families is $7,200. If you are 55 or older, you can make an additional catch-up contribution of $1,000.

So, while payroll deducted HSA contributions are not used for adjusted gross income, they can still provide tax benefits by reducing your taxable income. HSA accounts offer a great way to save for medical expenses while also saving on taxes.

When considering your financial planning for healthcare, one frequently asked question centers around payroll deducted HSA contributions and their impact on adjusted gross income (AGI). To clarify, the answer is a definitive no; these payroll deducted contributions do not figure into your AGI.