What Is the Penalty for Contributing to an HSA?

Health Savings Accounts (HSAs) are a great way to save for medical expenses while enjoying tax benefits. However, it's essential to understand the rules to avoid potential penalties. One common question that arises is, what is the penalty for contributing to an HSA?

If you contribute more than the allowed annual limit to your HSA, you may be subject to penalties from the IRS. The penalty for excess contributions is 6% of the excess amount. It's crucial to stay within the contribution limits to avoid unnecessary penalties.

Additionally, using HSA funds for non-qualified expenses can also result in penalties. If you withdraw funds for expenses not deemed eligible by the IRS before the age of 65, you may face a 20% penalty in addition to income tax on the amount.

Health Savings Accounts (HSAs) are an excellent tool for managing healthcare costs and saving money on taxes. However, it's important to be aware of the rules surrounding contributions to avoid incurring penalties that can eat into your savings.