Since this is a qualified medical expense, you are immediately entitled to reimburse yourself for that expense out of your HSA. Assume you have a doctor appointment that you pay for out of pocket using a credit card, debit card, or cash. This is the right way to remove funds from an HSA account, paying for (or reimbursing) qualified medical expenses. An expensive option, but at least you can get the funds out of the HSA.
#Max out of pocket cash donations 2017 plus
you will then pay tax on it), plus Line 17b will assess a 20% penalty that flows over to Form 1040. This amount will be added as income on Form 1040 (i.e. When you file your IRS Form 8899, you will have to call out this amount on Line 16 as a taxable distribution. Yes, that 20% tax sure bites, as it was your money to begin with but it is stuck in a “special” government account. If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% tax. You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. This is the hard way, just rip the money out and pay the price. Nevertheless, let’s discuss 4 options for removing money from an HSA account:ġ) Non Qualified Withdrawal (Penalty Tax) As such, the government does not look fondly at taking a tax advantage and then not playing by the rules.
The catch is, this money is required to be used for qualified medical expenses.
Part of the advantage of an HSA is that the money is triple tax advantaged – you are able to save significantly on taxes by contributing to the HSA. Let’s discuss the implications and options. Before you go to the ATM or HSA website and withdraw all of your HSA funds, take heed: there may be tax consequences to improperly withdrawing money. Need help keeping track of your HSA throughout the year? Sign up for the HSA Edge newsletter for infrequent but important updates.Īfter saving diligently, using either individual or employer contributions, you may want to take your money out of your Health Savings Account and use it for something different.
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