What is a Reportable Distribution on HSA?

If you have a Health Savings Account (HSA), it's important to understand what constitutes a reportable distribution. A reportable distribution from an HSA is one that needs to be reported to the IRS because it may be subject to taxes and penalties. Here's what you need to know:

A reportable distribution on an HSA occurs when you withdraw funds from your HSA for non-qualified medical expenses. This means using HSA funds for anything other than qualified medical expenses as defined by the IRS.

Reportable distributions need to be reported on your tax return as part of your income. If you're under 65 years old and use HSA funds for non-qualified expenses, you'll not only have to pay taxes on the distribution but also a 20% penalty.

If you're 65 or older, you can still make non-qualified withdrawals from your HSA without a penalty, but you'll need to report it as income for tax purposes.

Understanding reportable distributions from your Health Savings Account (HSA) can significantly impact your financial planning. A reportable distribution refers to instances where you withdraw funds for non-qualified medical expenses. Under IRS guidelines, this means using HSA funds for any purpose that doesn't align with approved medical expenditures.