How are distributions from an HSA taxed?
Distributions from your HSA used exclusively to pay qualified medical expenses for you, your spouse, or your dependents are excludable from gross income. Any other distributions not used exclusively to pay qualified medical expenses for you, your spouse, or your dependents are includable in your gross income and are subject to an additional 10 percent tax on the amount includable, except in the case of distributions made after your death, your disability, or your attainment of age 65.
Distributions from an HSA used exclusively to pay for qualified medical expenses of the account beneficiary, his or her spouse, or dependents are excludable from gross income. In general, amounts in an HSA can be used for qualified medical expenses and will be excludable from gross income even if the individual is not currently eligible for contributions to the HSA. However, any amount of the distribution not used exclusively to pay for qualified medical expenses is includable in gross income of the account beneficiary and is subject to an additional 10% tax on the amount includable, except in the case of distributions made after the account beneficiary’s death, disability, or attaining age 65.
Distributions from an HSA used exclusively to pay for the qualified medical expenses of you or your spouse or eligible dependents are generally excludable from gross income. The amount of any distribution not used exclusively for such qualified medical expenses is includable in your gross income and may be subject to an additional 10% premature distribution penalty tax on the amount includable. (This 10% penalty tax does not apply to distributions made after your death, disability, or attainment of age 65.) In addition, distributions made for expenses that are reimbursed by another health plan are includable in your gross income, whether or not the other health plan is a high-deductible health plan.
Distributions from HSAs may be exempt from federal income tax and penalties, depending on whether or not the distribution is used to pay for qualified medical expenses. Qualified distributions: Distributions for qualified medical expenses of the account holder, his or her spouse, or dependents are exempt from federal income tax and penalties. Nonqualified distributions: Distributions that are not used for qualified medical expenses are always includable in the individual’s gross income. In addition, nonqualified distributions are subject to an additional 10 percent penalty, unless the distribution is made after the account holder’s death, disability, or attainment of age 65. The Account Holder is responsible for determining whether an HSA distribution is qualified or nonqualified. The account holder should maintain records of his or her medical expenses sufficient to show that the distributions were made exclusively to pay for qualified medical expenses, and are, therefore, excludable
