Are Employee Contributions to an HSA Subject to FICA?

Only contributions through your employer reduce your FICA taxes.
Image Credit: miluxian/iStock/Getty Images

Health savings accounts offer substantial tax benefits for putting aside money for future health expenses. You can contribute to an HSA in two ways: either through your payroll deductions or by depositing money directly into your HSA. The tax implication of your contributions depends on the method you choose.

FICA Tax Implications

If you contribute to your HSA through a payroll deduction, the money is excluded from both income taxes and FICA taxes. For example, if you contribute $1,000 through payroll deductions, you won't have FICA taxes withheld on that $1,000 and your W-2 will show $1,000 less income. In contrast, if you make a contribution on your own, your W-2 will show that $1,000 of income but you get to claim the contribution as an income tax deduction. However, it doesn't reduce the amount of FICA taxes you owe.

references