What Happens If I Take Money Out of My HSA?

Health Savings Accounts (HSAs) are a great tool for managing healthcare expenses. However, it's essential to understand the implications of withdrawing money from your HSA before doing so. If you take money out of your HSA for non-qualified medical expenses, you may face penalties and taxes.

When you withdraw funds from your HSA, the money is no longer earmarked for healthcare expenses. Here's what happens if you take money out of your HSA:

• If you are under 65 and use the funds for non-qualified expenses, you will have to pay income tax on the amount withdrawn, along with a 20% penalty.
• If you are over 65, you will only pay regular income tax on the amount withdrawn for non-qualified expenses, without the additional penalty.
• It's crucial to keep accurate records of your HSA withdrawals and use them for qualified medical expenses to avoid penalties.
• Withdrawing money from your HSA for non-medical purposes can undermine the primary purpose of the account, which is to save for healthcare costs.

Before taking money out of your HSA, consider these factors and make sure you are using the funds for eligible medical expenses to reap the maximum benefits of your account.

Health Savings Accounts (HSAs) are an excellent way to manage and save for medical expenses, but it's crucial to know what it means to withdraw money from your HSA. Taking out funds for non-qualified medical expenses can lead to unexpected penalties and taxes that may impact your finances.