Is a balance in a HSA account treated like any other assets? I have been using it as supplemental retirement savings. I assume that it is not protected.
The balance in the account is not reported as an asset. The amount you contributed in 2017 is reported as untaxed income, though . If your employer contributed any money, that is not reported.
To clarify, employee pre-tax income that is contributed to an HSA through a cafeteria plan administered by the employer is not reported on FAFSA. After-tax money that is contributed to an HSA and that has been taken as an above line tax deduction is reported on FAFSA as untaxed income.
Really? That hardly seems fair. So if you are self-employed and open your own HSA, those contributions are added back onto your AGI. But if they are deducted on a W-2, then they are not added back in?
Yup.
Sheesh. It’s the exact same contribution. PLUS W-2 employees could also have an employer contribution that is not counted as untaxed income. Self-employed people really get the short end of the stick for no reason.
How about for profile schools? We wouldn’t be eligible for Federal aid. How the HSA is treated could have an impact on institutional aid. I have been doing this for years, so I have a substantial balance.
Pre-tax HSA contributions are indeed supposed to be reported as untaxed income on the FAFSA. From the Federal Student Aid Handbook:
Health savings accounts
Health savings accounts (HSAs) resemble tax-deferred pension and savings plans more than flexible spending arrangements; for example, the balance in an HSA persists from year to year, while that in a flexible spending arrangement must be spent on qualified expenses by the end of the year. Therefore, treat taxfree contributions to an HSA as untaxed income; these will appear on line 25 of the 2016 IRS Form 1040. The balance in the account does not count as an asset, nor would distributions from it count as untaxed income when they are used for qualified medical expenses.
Pre-tax HSA contributions from employee income made through an employer administered cafeteria plan DO NOT appear on line 25 of the IRS 1040 form; HSA contributions made by the employee/taxpayer outside of a cafeteria plan do appear here so that they can be taken as an above the line deduction and subtracted from AGI. There is no FAFSA instruction that directs the reporting of any HSA contribution, from employee income or otherwise, that does not appear on line 25 of the IRS 1040 form.
Okay - so the moral of the story is that it is reported if it appears on line 25 of the 1040 & it is not reported if is contributed through the employer cafeteria plan. It is not “not reported,” but it is sometimes not reported.
I don’t understand what you mean by this. I would say that contributing to an HSA by having pre-tax income contributed through an employer cafeteria plan is a common practice. These contributions are noted in box 12 of a W-2 with code W. They are not found anywhere on an IRS form 1040. If these pre-tax income HSA contributions through a cafeteria plan are supposed to be reported on FAFSA, where on FAFSA are they reported, and which FAFSA instruction directs this?
What I am saying is that not all HSA contributions are not reported on the FAFSA. So a blanket statement cannot be made that HSA contributions are not reported. Those made through an employer cafeteria plan are not reported, though.
And those that are made outside of a cafeteria plan are reported - that is the amount on line 25 of the 1040. It’s like the IRA deduction that gets reported as untaxed income.
I think you two are saying the same thing.
What I’m saying it that it is not a good reporting system. A W-2 employee does not have to add HSA contributions back into AGI, but a self-employed person does? What’s the logic of that? It’s the same type of contribution, the same tax benefit.
^^^
I agree with everything you say here.
IRA. Logic? Please.
Try being a single parent and trying to get the AOTC.