Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Health Savings Accounts (HSA)

Reporting HSA Contributions, Distributions, and Deductions

Form 8889, Part II

Form 8889, Part II, is used by taxpayers to report distributions from an HSA. Taxpayers receive tax-free distributions from an HSA to pay or be reimbursed for qualified medical expenses. The taxpayer will have to tell you what types of expenses were paid or reimbursed with the distribution.

Distributions from an HSA are reported to the taxpayer on Form 1099-SA, Distributions from an HSA, Archer MSA, or Medicare Advantage MSA. Form 1099-SA, box 5, will indicate whether the distribution is from an HSA, Archer MSA, or a Medicare Advantage MSA. The code in Form 1099-SA, box 3, identifies the distribution the taxpayer received. Code 1 is a normal distribution. Refer to Form 1099-SA for an explanation of the other codes.

If distributions are received for other reasons, the amount withdrawn will be included in income and reported on Form 1040, line 21. The additional tax on distributions not used for qualified medical expenses is 20%. This tax is computed on Form 8889 and reported on Form 1040.

Taxpayers do not have to take distributions from their HSA each year.

Tax software hint.

Once you enter the amounts on Form 8889, the software will carry the amounts to applicable lines of Form 1040. The amount of HSA distributions not used for qualified medical expenses will carry over to line 21. On the line for "Type," enter HSA. If you have more than one item to enter on line 21, see the Volunteer Resource Guide, TaxWise Income Tab, How/Where to Enter Income, which explains how to make the entries.

Form 8889, Part II.