What Happens If I Use My HSA Card for a Non-Medical Purchase?

Using your HSA card for a non-medical purchase can lead to some consequences that you should be aware of. Health Savings Accounts (HSAs) are designed to help you save and pay for qualified medical expenses, but using the funds for non-medical expenses can result in penalties and taxes.

When you use your HSA card for a non-medical purchase, the funds spent on those purchases are considered non-qualified distributions. Here's what happens when you use your HSA card for a non-medical purchase:

• You may have to pay taxes: Non-qualified distributions from your HSA are subject to income tax. This means that the amount you spend on non-medical purchases will be added to your taxable income for the year.
• You may face penalties: In addition to paying taxes on non-qualified distributions, you may also be subject to a 20% penalty on the amount spent on non-medical purchases. This penalty is imposed by the IRS to deter misuse of HSA funds.
• You should keep receipts and documentation: It's important to keep track of your HSA expenses and have proper documentation for all purchases made using your HSA card. This will help you differentiate between qualified and non-qualified expenses in case of an audit.

Overall, it's crucial to use your HSA funds for qualified medical expenses to avoid taxes and penalties. If you accidentally use your HSA card for a non-medical purchase, you should consider reimbursing the account to avoid tax implications.

Using your HSA card for a non-medical purchase may seem harmless, but it can have significant repercussions. Health Savings Accounts (HSAs) are intended solely for covering qualified medical expenses. By diverting funds for non-medical uses, you risk incurring extra costs, including penalties and taxes.