What Happens if You Withdraw Cash from an HSA?

Withdrawing cash from your Health Savings Account (HSA) can have financial implications and tax consequences. When you withdraw cash from your HSA, it is important to understand the following:

• Withdrawals for qualified medical expenses are tax-free.
• Withdrawals for non-medical expenses are subject to taxes and penalties.
• The penalty for non-qualified withdrawals is 20%.
• After age 65, non-medical withdrawals are taxed as regular income.
• Keep receipts for all medical expenses to prove they were qualified purchases.

It's crucial to know the rules and regulations regarding HSA withdrawals to avoid unnecessary fees and taxes. Consult with a financial advisor or tax professional if you are unsure about making a withdrawal.

When withdrawing cash from your Health Savings Account (HSA), it’s vital to understand the financial and tax implications involved. Withdrawals made for qualified medical expenses not only provide relief but also come with significant tax advantages, as they are completely tax-free. On the other hand, withdrawing funds for non-medical reasons can lead to steep tax consequences, including a hefty 20% penalty on the amount taken out, which can take a serious toll on your finances.