Are You Taxed on Money Used from an HSA?

If you have a Health Savings Account (HSA) or are considering opening one, you may wonder if you'll be taxed on the money you use from it. The good news is that, in general, withdrawals from your HSA are tax-free as long as they are used for qualified medical expenses. This tax advantage is one of the key benefits of having an HSA.

HSAs are a great way to save for healthcare costs while also getting a tax break. Here's how it works:

• Contributions made to your HSA are tax-deductible, meaning you can reduce your taxable income by contributing to your HSA.
• Any interest or investment earnings on the money in your HSA are tax-free.
• Withdrawals from your HSA for qualified medical expenses are also tax-free.
• If you use HSA funds for non-qualified expenses, you will be subject to income tax on the amount withdrawn, plus a 20% penalty if you are under age 65.

It's important to keep accurate records of your HSA withdrawals and what they were used for to ensure you meet the IRS guidelines and avoid any potential tax liabilities. As long as you use your HSA funds for qualified medical expenses, you can enjoy the tax benefits that come with it.

Did you know that when you use funds from your Health Savings Account (HSA) for qualified medical expenses, those withdrawals are generally tax-free? This is one of the most appealing features of HSAs that can significantly impact your healthcare budgeting.