What is the Current Penalty Tax Percentage for HSA?

Health Savings Accounts (HSAs) are a great way to save for medical expenses while enjoying tax benefits. However, it's important to be aware of the penalties that come with non-qualified HSA distributions.

As of 2021, the penalty tax percentage for HSA non-qualified distributions is 20%. This means that if you withdraw funds from your HSA for non-medical expenses before the age of 65, you will be subject to a 20% penalty tax in addition to regular income tax.

It's crucial to use your HSA funds for eligible medical expenses to avoid this penalty. Qualified medical expenses include a wide range of services, treatments, and medications that are deemed medically necessary.

Additionally, once you reach the age of 65, you can withdraw funds from your HSA for any reason without facing the 20% penalty tax. While you will still owe regular income tax on the distribution, there is no penalty for non-qualified expenses once you reach this age.

Health Savings Accounts (HSAs) offer individuals an exceptional way to save money for future medical expenses while taking advantage of tax benefits. It's essential to understand the implications of withdrawing funds for non-qualified purposes.

As of 2021, if you take money out of your HSA for non-medical expenses before turning 65, you will incur a hefty penalty tax of 20%. This means you'll not only pay the standard income tax on the withdrawal, but you'll also be subject to that 20% extra charge, making it vital to use your HSA wisely.