Health Savings Accounts - Updated

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173), was enacted December 8, 2003. This federal Act amended the Internal Revenue Code (IRC) and provided for the establishment of health savings accounts.

For tax years beginning in 2004 and ending before January 1, 2011, Wisconsin does not follow the provisions of Public Law 108-173 relating to health savings accounts.

Effect of Wisconsin Not Following the Federal Law Change

All federal provisions relating to health savings accounts do not apply for Wisconsin. For example:

Employer Must Notify Employee on W-2 Wage Statement

Contributions to a health savings account that represent additional wages to an employee for Wisconsin purposes can be reported to employees by either:

Information for Individuals - Where to Adjust for Differences Between Wisconsin and Federal Law

Individuals should use Wisconsin Schedule I (titled "Adjustments to Convert Federal Adjusted Gross Income and Itemized Deductions to the Amounts Allowable for Wisconsin") to adjust for differences between the Wisconsin and federal income tax treatment of health savings accounts. (Note: Even in those cases where the employer failed to notify the employee on the Form W-2 as required above, the employee must still adjust for the difference on Schedule I.)

When completing Part II of Schedule I, it will be necessary to complete a revised federal Schedule A to determine the allowable medical expenses for use in determining the Wisconsin itemized deduction credit. Medical expenses paid from the health savings account are included in line 1 of the revised federal Schedule A as a medical expense. All medical expenses are then reduced by 7.5% of federal adjusted gross income.

Page last updated February 16, 2011