State Income Tax Information on
Health Savings Account
State Tax Treatment of Health Savings Accounts
- Federal HSA Tax Treatment
- Legislation for HSA Tax Treatment
- No State Taxes on HSAs
- Dividends & Interest Tax on HSAs
States Following Federal HSA Tax Treatment
These states offer deductions on state income taxes for contributions to Health Savings Accounts.
*Hawaii’s Act 89 (2004) conforms state taxes with federal law, as amended to Dec. 31, 2003. Health Savings Accounts are included. See HI-Ann. 2004-02.
State Legislation Needed for HSA Tax Treatment
States that have indicated that they must pass state legislation before Health Savings Accounts will receive a tax benefit at the state level.
These two states also consider any interest or capital gains you earn in your HSA as taxable income.
Dividends and Interest Tax on HSA Accounts
These states do not tax income, and thus there is no state income tax deduction when contributing to an HSA. They do tax dividends and interest on HSA accounts if you make a taxable withdrawal from your account.
*In New Hampshire you must report these earnings if they amount to over $2400 filing individually, or $4800 if married filing jointly.
**In Tennessee you must report your dividend and interest earnings if they total over $1250 for the year, or $2500 if you are married filing jointly.
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