Do I Report My HSA Account On The FAFSA?
This question is about FAFSA parent assets.
No — you don’t report your Health Savings Account (HSA) balance as an asset on the Free Application for Federal Student Aid (FAFSA).
Health Savings Accounts can be confusing during financial aid season. Families often wonder whether the money in an HSA (intended for medical expenses) should be listed as an asset when applying for federal student aid.
The U.S. Department of Education has issued clear guidance on this: the balance in an HSA is not reported as an asset on the FAFSA, though certain contributions do count as untaxed income.
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What The FSA Handbook Says
According to the 2022–23 Federal Student Aid Handbook (PDF File) under “Untaxed Income":
(h). Health savings accounts (HSAs) resemble tax-deferred pension and savings plans more than flexible spending arrangements. For example, the balance in an HSA persists from year to year, while that in a flexible spending arrangement must be spent on qualified expenses by the end of the year. Therefore, treat tax-free contributions to an HSA as untaxed income; these will appear on line 12 of Schedule 1 of Form 1040. The balance in the account does not count as an asset, nor would distributions from it count as untaxed income when they are used for qualified medical expenses. Distributions not used for qualified expenses are subject to income tax (and a possible penalty) and will be counted in the adjusted gross income.
That means when filling out the FAFSA, you should skip the HSA balance entirely. It’s not included in the calculation of assets that can affect your Student Aid Index (SAI).
How HSA Contributions Are Treated
Even though the account balance isn’t reported, contributions to your HSA can still show up on your FAFSA as untaxed income. These contributions appear on line 12 of Schedule 1 on your IRS Form 1040. When the FAFSA pulls tax data, this line is included in the calculation of your total untaxed income.
So, while you don’t need to worry about reporting the balance, you do need to be aware that contributions could slightly increase your income figure used for financial aid purposes.
What About HSA Withdrawals
Withdrawals from your HSA also depend on how the funds are used. If you use the money for qualified medical expenses, those distributions are not taxable and don’t need to be reported anywhere on the FAFSA. They’re treated the same way as other tax-free reimbursements for medical costs.
However, if you withdraw funds for non-medical reasons, that amount becomes taxable income. Because your FAFSA reflects the numbers from your tax return, those non-qualified withdrawals could indirectly reduce your aid eligibility by raising your adjusted gross income (AGI).
People Also Ask
Do I have to include my HSA balance when filling out the FAFSA?
No, you do NOT report your HSA balance as an asset on the FAFSA.
Are HSA contributions reported as income or assets on the FAFSA?
HSA contributions will be reported as untaxed income on the FAFSA.
Will HSA withdrawals affect my financial aid eligibility?
Generally no, but if you use the HSA for a non-qualifying expense, it will be considered income and it will be reported on the FAFSA as well.
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Editor: Colin Graves
Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
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