What Happens If You Withdraw Money from HSA? - Understanding the Impact on Your Health Savings Account

Health Savings Accounts (HSAs) offer individuals a way to save for medical expenses while enjoying tax benefits. However, it's essential to understand the consequences of withdrawing money from your HSA to make informed decisions.

When you withdraw money from your HSA for qualified medical expenses, it's tax-free. But what happens if you withdraw funds for non-medical expenses?

Here's what happens if you withdraw money from your HSA:

• Withdrawals for qualified medical expenses are tax-free.
• Withdrawing funds for non-qualified expenses incurs taxes and penalties.
• If you're under 65 and use the funds for non-medical expenses, you'll face a 20% penalty on the amount withdrawn.
• If you're over 65, you'll still pay ordinary income tax on non-qualified withdrawals.
• It's crucial to keep receipts for all HSA expenses to prove they were for qualified medical expenses in case of an audit.
• Consider other options before tapping into your HSA for non-medical expenses to avoid penalties and taxes.

Understanding the implications of withdrawing money from your HSA can help you make the most of this valuable savings tool while staying compliant with IRS regulations.

Health Savings Accounts (HSAs) are an incredible tool for saving money on healthcare costs, but withdrawing funds can be tricky. Knowing the ins and outs of your HSA withdrawals is essential to avoid unnecessary costs.