What Happens to Money in HSA If Account Closed?

Health Savings Accounts (HSAs) are a great way to save for medical expenses while enjoying tax benefits. But what happens to the money in your HSA if you close the account?

If you close your HSA account, you won't lose the money you've already saved in it. However, there are certain rules and consequences to be aware of:

• Any remaining balance in your HSA can still be used for qualified medical expenses.
• If you close your HSA and use the funds for non-qualified expenses before age 65, you will have to pay taxes on the amount withdrawn, plus a 20% penalty.
• If you close your HSA after age 65, you can withdraw the funds for non-medical expenses penalty-free, but you will have to pay income tax on the amount withdrawn.
• Some HSA providers may charge a fee for closing the account, so it's important to check with your provider for any associated costs.

It's essential to understand the implications of closing your HSA account before making a decision. You may want to consider keeping the account open even if you no longer contribute to it, as the funds can still be used for future medical expenses.

Health Savings Accounts (HSAs) offer a fantastic way to set aside funds for future medical expenses while reaping tax advantages. If you've decided to close your HSA account, it's important to know that the funds you've accumulated won't vanish. Here’s what you should keep in mind:

• Your remaining balance in the HSA can be utilized for qualified medical costs even after closing the account.
• If you withdraw the money and don’t use it for qualified expenses prior to reaching age 65, you’ll incur taxes on the amount plus a hefty 20% penalty.
• Post age 65, you can withdraw HSA funds for any purpose without facing penalties, but you will still owe income taxes on non-medical withdrawals.
• Some institutions may impose charges for account closure, so make sure to consult with your HSA provider about any potential fees.

Before deciding to close your HSA, weigh your options carefully. Keeping the account active—even without contributions—can be beneficial, as the funds remain available for inevitable health expenses in the future.