Some states define income differently than the IRS. As a result, some income that may be tax free at the federal level may not be at the state level. The federal government does not tax qualified HSA contributions, distributions and rollovers from an Archer MSA to an HSA, but some states do. While these state laws are not necessarily a barrier to offering HSAs, such state laws could be considered a disincentive to having one. All but a few states now conform to the Federal Internal Revenue Code for HSA purposes. The states that do not accept or follow the federal tax treatment for HSAs are detailed below. We have provided the link to the state’s revenue department for more information.
States with no income tax.
States without a state income tax do not provide an income tax deduction for HSA contributions. The states are:
- Alaska
- Florida
- South Dakota
- Texas
- Washington
- Wyoming
States that do not tax income, but do tax dividends and interest.
Two states have no income tax but do tax dividends and interest. HSA holders may have to pay taxes on any interest or dividends earned in their HSA.
