What Happens When You Send Yourself a Check from HSA?

If you send yourself a check from your Health Savings Account (HSA), there are certain things you need to be aware of. When you do so, you are essentially withdrawing funds from your HSA, and this action can have consequences that may impact your taxes and health savings account. Here's what you need to know:

Firstly, when you send yourself a check from your HSA, you are withdrawing money from the account. This withdrawal is counted as taxable income if it is not used for qualified medical expenses. If you are under 65 years old and use the funds for non-medical expenses, you will be subject to both income tax and a 20% penalty. However, if you are over 65, you can use the funds for any purpose without the penalty, though regular income tax would still apply.

Additionally, sending yourself a check from your HSA for non-qualified expenses can impact the tax-free status of your HSA. The whole point of an HSA is to save money for medical expenses on a pre-tax basis. If you use the funds for non-medical expenses, you lose out on the tax benefits of the account.

When you choose to send yourself a check from your Health Savings Account (HSA), it's crucial to understand the potential consequences this decision might hold. Withdrawing funds in this manner counts as a distribution, and the IRS has strict guidelines regarding how these funds should be used. If you opt to use the funds for any non-qualified expenses before turning 65, you could be subject to significant penalties and taxes, making it a costly mistake.