What Happens When I Withdraw from a Health Savings Account (HSA)?

Withdrawing from a Health Savings Account (HSA) is a straightforward process, but there are some important things to keep in mind to avoid any penalties or taxes. When you withdraw funds from your HSA, the money can be used for qualified medical expenses for you, your spouse, or your dependents. Here's what you need to know about withdrawing from an HSA:

Key Points to Remember:

• Withdrawals used for qualified medical expenses are tax-free.
• If you withdraw funds for non-qualified expenses before age 65, you may face a 20% penalty.
• After age 65, withdrawals for non-qualified expenses are subject to regular income tax but no penalty.
• Keep accurate records of your withdrawals and expenses for tax purposes.

Remember, the primary purpose of an HSA is to save for medical expenses in a tax-advantaged way. By understanding the rules around withdrawals, you can make the most of your HSA while avoiding unnecessary fees.

Withdrawing from a Health Savings Account (HSA) is quite simple, but it's crucial to understand the implications to ensure you're utilizing your funds effectively.

Key Considerations When Withdrawing:

• Remember, funds withdrawn for qualified medical expenses, such as doctor visits or prescription medications, come with no tax burden.
• Be aware that any withdrawals for non-qualified expenses before turning 65 will incur a hefty 20% penalty in addition to standard income tax.
• Once you reach the age of 65, you can withdraw money for non-qualified expenses without facing the 20% penalty, but keep in mind that income tax will apply.
• It's wise to maintain detailed records of all withdrawals along with receipts for medical expenses, as this can help during tax season.

Your HSA is meant to be a powerful tool for managing medical expenses, so familiarize yourself with the withdrawal rules to make the most of your account and keep penalties at bay.