Tax guide

Withdrawing from an HSA

How do I use funds from my HSA?

When you sign up for an HSA, you’ll probably receive a debit card – though some HSAs still provide paper checks. Some HSAs even allow you to pay bills for doctors, hospitals, and specialists through an online bill paying feature.

Let’s look at how to withdraw funds from an HSA.

Is paying with my HSA card the same thing as withdrawing from my HSA?

Yes: Withdrawing funds from your HSA can be as simple as swiping a card. You can use your HSA debit card to pay for medical supplies, doctor co-pays and other medical services.

What happens if I use my HSA funds on something other than medical expenses?

If you make a non-qualifying withdrawal – meaning you used money for a non-qualifying expense – you’ll get hit with an IRS penalty. The penalty is 20% of the withdrawal, which is a substantial amount.

How’s the penalty assessed? You must self-report any non-qualifying purchases on the Health Savings Account screen. Not claiming the non-qualifying expenses may lead to an audit and more penalties and fines.

How can I prevent avoid a penalty? First, check whether it’s actually a qualifying expense. It’s also a good idea to keep receipts (itemized if possible). If you use your HSA to pay for over-the-counter medications, keep a copy of the prescription provided by your doctor. Over-the-counter medications are not normally a qualifying expense, but they are if you have a prescription. Bottom line: if you use your HSA to make a payment or make a purchase, keep the paperwork.

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What HSA information do I need to report on my taxes?

When you file your tax return, you have to report any withdrawals you made during the year (also known as distributions). You’ll receive Form 1099-SA either by mail or electronically—this form will show how much money was distributed in the year from your HSA, whether it was for qualifying expenses or not.

Filing your taxes with HSA information is easy with 1040.com

We like keeping taxes simple, and that even goes if you have HSA information to report on your return. Just enter the distributions amount on the Health Savings Account screen on your 1040.com return, and you’ll be home free. Don’t forget to sign up or log in to file your taxes with 1040.com today!

Also see:
HSAs and Your Tax Return
Who's Eligible for an HSA?

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