What If My HSA Expenditure Is Not Eligible?

Health Savings Accounts (HSAs) are a great way to save money for healthcare expenses while enjoying tax benefits. However, it is important to know what expenses are eligible for HSA reimbursement to avoid any issues with the IRS. So, what happens if you use your HSA funds for an expense that is not deemed eligible?

If you withdraw HSA funds for non-qualified expenses, you will be subject to taxes and penalties. The amount withdrawn for ineligible expenses will be included in your gross income for that year and will be subjected to income tax. Additionally, you will incur a 20% penalty on the non-qualified distribution if you are under 65 years old.

Using your Health Savings Account (HSA) wisely is essential, as tapping into it for non-qualified expenses can lead not only to taxes but also hefty penalties. It's crucial to familiarize yourself with what expenses are eligible to safeguard your hard-earned money.