What is the Percentage of Tax Penalty for HSA Withdrawal?

Health Savings Accounts (HSAs) are a great way to save for medical expenses while enjoying tax advantages. However, it's important to understand the tax implications when making withdrawals from your HSA. If you withdraw funds from your HSA for non-qualified medical expenses, you may be subject to a tax penalty.

The percentage of tax penalty for HSA withdrawal is typically 20%. This means that if you withdraw funds for non-qualified expenses, you will not only owe income tax on the withdrawal amount but also an additional 20% penalty on that amount. It's essential to be aware of these penalties to avoid any surprises when using your HSA funds.

Here are some key points to consider regarding HSA withdrawals and tax penalties:

• Qualified medical expenses include a wide range of healthcare services and products prescribed by a licensed healthcare provider.
• Non-qualified expenses may include things like cosmetic procedures, vitamins, or over-the-counter medications without a prescription.
• If you are under 65 and use HSA funds for non-qualified expenses, you will incur both income tax and the 20% penalty on the withdrawal amount.

When it comes to managing your Health Savings Account (HSA), knowing the tax penalty for non-qualified withdrawals is crucial to protecting your hard-earned money. If you find yourself withdrawing funds for anything other than qualified medical expenses, be prepared for a tax penalty of 20% on top of standard income taxes.