Does Minnesota Tax HSA Contributions? Understanding HSA Taxation in Minnesota

In Minnesota, contributions made to Health Savings Accounts (HSAs) are tax-deductible on both state and federal levels, meaning they are not subject to Minnesota state income tax.

HSAs are set up to help individuals save for qualified medical expenses on a tax-free basis. Here are some key points to consider about HSA taxation in Minnesota:

• Contributions made by an individual or their employer to an HSA are tax-deductible on both federal and state tax returns.
• The growth and interest earned on the funds within the HSA are tax-deferred.
• Withdrawals used for qualified medical expenses are tax-free.
• If funds are withdrawn for non-qualified expenses, they may be subject to income tax and an additional 20% penalty.

In Minnesota, Health Savings Accounts (HSAs) are a great way to save on medical expenses, and contributions to these accounts are tax-deductible both federally and at the state level, ensuring you do not pay Minnesota state income tax on those amounts contributed.