Box 12W - HSA Employer Contributions

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Overview

Based on our experience, W-2 Box 12W is one of the most commonly confused items because it is nonsensical; people consider money deferred from their paychecks as “their” contributions to their health savings account (HSA).

However, any amounts listed in Box 12W reflects amounts for which an employee's taxable wages have already been reduced (saving the employee from taxes once already). This tax savings was accomplished because technically the employee elected to contribute to their HSA under an employer's Section 125 plan.

See IRS W-2 Instructions: “Code W—Employer contributions to a Health Savings Account (HSA). Show any employer contributions (including amounts the employee elected to contribute using a section 125 (cafeteria) plan) to an HSA. See Health savings account (HSA)."
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Explained Another Way

- If the HSA contribution was excluded from the wages shown on the W-2, then they were considered pretax deductions under an employer's S125 plan and the amount should be included in Box 12W.  
- If an employee contributes to their HSA using after tax money, then the amount they contributed should not show up in Box 12W.

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How to Check if Your HSA Contributions Were Deducted Pretax

If you are looking at a paycheck and the deduction says "HSA Single" or "HSA Family", it was almost certainly deducted pretax. If the item is listed as "Direct Deposit Savings" or "Direct Deposit Checking", it was likely after tax. To check the math, refer to your paycheck and you should see the the taxable wages listed in parenthesis next to your Medicare tax for the paycheck. The amount in parenthesis is the wage total used to calculate your taxes for this paycheck (taxable wages). ByLooking at this taxable wage figure on the check; you should be able to work out which deductions on your paycheck were deducted from the earnings on your paycheck pretax.

Pretax deductions in paycheck example: 

  • Current Earnings = $1900.00
  • Pretax Health = $125.50
  • Pretax Dental = $16.80
  • Pretax HSA Single = $250 
  • This equals $1507.70 Taxable OASDI/Social Security & Medicare Wages
  • $1507.70 x the Medicare rate of 1.45% = $21.86. Thus the HSA and health/dental premiums were deducted pretax, but only the HSA items fall in Box 12W.

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Why Do After-Tax HSA?

After-tax HSA contributions are made by employees with an individual health plan or coverage through a spouse's employer. To contribute to the HSA, these employees set up a direct deposit into the account just like a traditional checking direct deposit. However, because the employee is not covered under the employer's health plan and/or Section 125 plan, it is not permissible for the employee to defer their wages pretax.

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Additional Examples of HSA Contributions

Need more clarification? Here are our favorite internet explanations for HSA Box 12W:

  • "Perhaps the easiest way to understand Box 12 is that it prevents double dipping. Your contribution was pretax, so your contribution goes in Box 12 to keep you from getting another break. Your employer's contribution was not taxable to you, so it also goes in Box 12, to, again, keep you from getting another break on the same money. You paid no taxes on either category of contributions. So you don't get another break. That's the purpose of Box 12." - jcastro
  • "The idea is, if you already paid no tax because the contributions (yours and your employer's) were excluded from your Box 1 wages, then no further deduction is shown on Form 1040. However, if you paid directly into the HSA (not through your employer) and did not exceed the maximum allowed from all contribution sources, then you get an adjustment (deduction) on Page 1 of Form 1040."
  • "Your payroll deductions for the HSA account will be shown on your W-2 in Box 12, marked code 'W'. Because your payroll deductions were taken pretax, they are considered 'employer contributions' and are to be entered on Line 9 of form 8889. Do not enter UCAR payroll deducted contributions on Line 2. Since payroll deductions for the HSA were taken pretax, you will not be able to claim a deduction on Line 13.”

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