How is an HSA distribution taxed?
An HSA distribution that is used to pay qualifying medical expenses not paid or covered by insurance will generally not be included in the account owner’s gross income. Distributions that are used for non-medical purposes will be included in gross income and may be subject to a 10% excise tax. The excise tax applies to any distribution made for non-medical purposes prior to the account owner’s death, disability, or reaching age 65. A person being ineligible to contribute to his or her HSA does not change how a distribution is taxed.
