HSA inclusion in taxable income

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elgoog
Posts: 84
Joined: Thu Sep 19, 2019 9:40 pm

HSA inclusion in taxable income

Post by elgoog »

Me: Canadian citizen/tax-resident working in US on TN status

My employer opened an HSA account for me and deposits a certain amount into that HSA every year. I have never made any transactions on the HSA. Since my employer is in California, the HSA contribution is taxable there but it is not taxable at the federally.

My questions are:
1. When I report my Canadian taxes, is this employer contribution reportable as taxable income in Canada? My W-2 doesn't include the HSA amount but box 16 does (State wages, tips, etc.)


2. If I do NOT report it in my taxable income, can that contribution still be used in the calculation of the foreign tax credit since I had to pay California tax on it. https://www.canada.ca/en/revenue-agency ... tx-xmptncm > Tax-exempt income gives more guidance:

1.68 If, for example, a taxpayer resident in Canada is exempt from income or profits taxes levied by a foreign country because of a tax treaty but pays an income or profits tax to a political subdivision of that country (income tax treaties typically do not cover taxes levied by a political subdivisions, for example, states, provinces, cities, and counties), the second condition above would not be fulfilled. As a result, the income on which the political subdivision’s tax is paid would not be tax-exempt income and such income would qualify for inclusion in the FNBI in the foreign tax credit formula

Thank you.
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: HSA inclusion in taxable income

Post by nelsona »

What makes you think that the HSA payment would be a tax treaty matter? Income FROM the HSA is treaty protected (XXI.2). But whether the contribution is taxable or not in canada is simply a matter of CDn tax law, not the treaty.

The clauses you are referring to relate to income that is excluded by treaty.

In any event, In my opinion the employer contribution is not taxable in Canada. I would simply include the Cali tax along with all other tax on your wages.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
elgoog
Posts: 84
Joined: Thu Sep 19, 2019 9:40 pm

Re: HSA inclusion in taxable income

Post by elgoog »

Makes sense. Thanks again, Nelsona.
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