What are the tax implications of withdrawing from HSAs?

What are the tax implications of withdrawing from HSAs?

Withdrawing from Health Savings Accounts (HSAs) can have tax implications depending on how the funds are used. If you withdraw for qualified medical expenses, it's tax-free. However, if you withdraw for non-qualified expenses, you'll face income tax and a 20% penalty if you're under 65.

What qualifies as a qualified medical expense?

Qualified medical expenses include costs for medical care, dental care, vision care, and certain long-term care services. The IRS provides a detailed list of what qualifies.

What happens if I withdraw money after age 65?

After age 65, you can withdraw funds from your HSA for any purpose without the 20% penalty. However, if the funds are not used for qualified medical expenses, you'll still owe income tax on those withdrawals.

Can I use HSA funds for health insurance premiums?

You can use HSA funds for health insurance premiums if you're receiving unemployment benefits or if you're over 65. Otherwise, it's generally not allowed.