How are distributions from an HSA taxed?
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 of the account beneficiary, spouse or dependents 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 are excludable from gross income if used for medical expenses of the HSA account holder and the account holder’s family, with certain exceptions, and are includible in gross income if used for any other purpose. If included in gross income, distributions generally are subject to an additional 10 percent tax. However, if distributions that are included in gross income are made after the account holder turns age 65, becomes disabled or dies, the additional 10 percent tax does not apply.
Distributions from an HSA used exclusively to pay for qualified medical expenses are excludable from gross income. In general, HSA used for qualified medical expenses are excludable from gross income even if the individual is not currently eligible to make contributions to the HSA. However, any portion of a distribution not used exclusively to pay for qualified medical expenses must be included in the gross income of the account beneficiary and is subject to an additional 10 percent tax, except in the case of distributions made after the account beneficiary’s death, disability, or attaining age 65.
Distributions from an HSA to pay the medical expenses of the individual and his or her spouse or dependents are excludible from income. Distributions that are not used to pay medical expenses are subject to income tax. Such distributions also are subject to an additional 10% penalty tax unless the distribution is made after age 65 or on account of death or disability. Rollovers into HSAs From Archer MSAs and Other HSAs. Rollover contributions may be made to an HSA from an Archer MSA or another HSA. Such rollover contributions need not be in cash and are not subject to the annual contribution limits. From health flexible spending accounts (FSAs) and health reimbursement accounts (HRAs). Certain amounts in a health FSA or HRA may be rolled over directly to an HSA. Contributions must be transferred to the HSA before January 1, 2012. Such rollovers may not exceed the lesser of (1) the balance in the FSA or HRA as of September 21, 2006, or (2) the balance in the FSA or HRA as of the date of
