What is the Penalty for Using HSA Distributions to Pay Non-Qualified Expenses?

When it comes to Health Savings Accounts (HSAs), it's crucial to understand the rules and regulations to avoid any penalties. One common question that arises is, what is the penalty for using HSA distributions to pay non-qualified expenses?

Here's everything you need to know:

• HSAs are designed to help individuals save for qualified medical expenses tax-free.
• If you use your HSA funds for non-qualified expenses, you may be subject to penalties.
• The penalty for using HSA distributions for non-qualified expenses is 20%.
• This penalty is in addition to the regular income tax that you would owe on the distribution.
• It's important to keep detailed records of your HSA expenses to ensure compliance with IRS guidelines.

Remember, using your HSA funds for non-qualified expenses can have financial consequences, so it's essential to use them wisely.

When you think about Health Savings Accounts (HSAs), it’s important to fully grasp what qualifies as a medical expense and what doesn't to keep your finances intact. Many people find themselves asking, what is the penalty for using HSA distributions to pay non-qualified expenses?