FAFSA Treatment of Employer-Sponsored HSA vs. Individual HSA

[brantly]

@BelknapPoint

This is NOT the case with HSAs. If you have an employer-sponsored HSA, the EMPLOYEE’S pretax contributions are NOT added back into income for FAFSA. That’s my point. Employee contributions are not treated as income on FAFSA.

However, tax-deductible HSA contributions ARE treated as untaxed income ONLY for self-employed workers.

Just to be clear, an employee with an employer-sponsored HSA can make either kind of employee HSA contribution: through payroll deduction with the employer, and also after-tax contributions directly from the employee that can then be taken as an above-the-line tax deduction. The direct employee contributions would suffer the same FAFSA treatment as similar HSA contributions from self-employed workers. Hence my remark above that for those who want to contribute to an employer-sponsored HSA and are expecting to use federal student aid, they should, as much as possible, make their employee contributions through pre-tax payroll deductions.

Correct. If the contribution is not entered on a W-2 in Box 12 as Code W, it is added back into income.