Tax Treatment of US Healthcare Savings Accounts (HSA)

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

moderate_mustachian
Posts: 1
Joined: Sat May 12, 2018 10:30 pm

Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by moderate_mustachian »

I can't seem to find a clear and recent answer about Canadian tax treatment of US HSA (healthcare savings accounts). Should one try to spend down this money before returning / moving-to Canada, or can it grow tax-free much like an IRA? I've got a significant amount saved in my HSA.

Anecdotal information seems to imply it is okay to leave it as-is, but I've also got concerns about cross border compliance issues with the HSA holder (the same way many US brokerages will freeze / force liquidation of accounts if investor moves overseas).

Thoughts or advice?
nelsona
Posts: 16806
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

You can keep the HSA, and use it like you were while in US, on eligible expenses. If you use it on ineligible expenses, the withdrawals will be taxable in Canada and US. Of course, you may not have many medical expenses in Canada, but you can use the funds for any that you do incur. They are protected by the treaty, as "benefit" accounts.


As to keeping your funds with a praticular firm, that should be a concern for ALL you US accounts (401(K), IRA, Roth, etc). You need to get CLEAR indication from the sccount managers that you can keep them after leaving, or find another firm BEFORE you leave US.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D
roy123
Posts: 3
Joined: Fri Nov 29, 2019 7:17 am

Re: Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by roy123 »

This is very useful.
pl0910001
Posts: 22
Joined: Fri Jun 21, 2019 6:33 pm

Re: Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by pl0910001 »

Hey Nelson, i have a follow up question. I am working in the United States but am still a tax resident of Canada. If I contribute to an HSA, is that money tax deductible in Canada for the year in which it is earned? If so, do i claim it as a medical expense?
Thanks
nelsona
Posts: 16806
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by nelsona »

It is deductible, but simply by not including it your wage income (just as it is not included in US). When you incur medical expenses which you pay with HSA, those expenses can be claimed in Canada.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D
pl0910001
Posts: 22
Joined: Fri Jun 21, 2019 6:33 pm

Re: Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by pl0910001 »

So if i read that right, any income placed into a HSA will not show up on my W2?
nelsona
Posts: 16806
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by nelsona »

It will not show up in your wage box ; it will be a coded amount on your W-2, like your 401(k) etc. CRA has never said to add that amount back into your wages (unlike 401(k)).
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D
pl0910001
Posts: 22
Joined: Fri Jun 21, 2019 6:33 pm

Re: Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by pl0910001 »

Thanks for the follow-up. Much appreciated
Grad467_2
Posts: 15
Joined: Wed Apr 15, 2020 6:57 pm

Re: Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by Grad467_2 »

Good evening Nelsona. I paid into an HSA for 2019 but it does not appear on my W2 in any of the boxes. Can I simply print out from the company I work for the amount I paid into the HSA for 2019 or will I need a tax document for filing purposes?

Thanks in advance for any information from anyone in the group..
nelsona
Posts: 16806
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by nelsona »

If you paid thru your payroll, it MUST appear on your w-2 (Box 12 code w). If you paid on your own, you simply enter it on 1040, and fill form 8889. The form from your HSA will be issued long after tax time
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D
Grad467_2
Posts: 15
Joined: Wed Apr 15, 2020 6:57 pm

Re: Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by Grad467_2 »

nelsona wrote:
> If you paid thru your payroll, it MUST appear on your w-2 (Box 12 code w).
> If you paid on your own, you simply enter it on 1040, and fill form 8889.
> The form from your HSA will be issued long after tax time

Doesn't appear on w-2 (Box 12 code w) but I did pay into HSA (deduction through my pay checks). I used the amounts so I assume I can still use the amount and if audited, provide the HSA statement?

Thanks again for the response nelsona - truly appreciate your expertise and your opinions
nelsona
Posts: 16806
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by nelsona »

You might want to get your employer to issue a corrected W-2.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D
sajc
Posts: 16
Joined: Sun Apr 12, 2020 5:55 pm

Re: Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by sajc »

Just adding on to the discussion, can a commuter working in the states and living on Canadian side contribute to a HSA?
sajc
Posts: 16
Joined: Sun Apr 12, 2020 5:55 pm

Re: Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by sajc »

sajc wrote:
> Just adding on to the discussion, can a commuter working in the states and
> living on Canadian side contribute to a HSA?
I ask this because I read that since in Canada, there is govt assisted medicare, one cannot contribute to a HSA.
nelsona
Posts: 16806
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Tax Treatment of US Healthcare Savings Accounts (HSA)

Post by nelsona »

That is correct. The Cdn healthcare plan falls under the definition of a plan which prevents one from contributing to an HSA. It is ok if you already have a plan, you can use it, but not contribute to it.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D
Post Reply