Скачать или смотреть Is withdrawal from an HSA subject to penalty if funds are used for non-medical purposes?

• Employee Name: John
• Employee Title: Customer Service Manager
• Annual Salary: $95,000
• Age 55 or older? No
• 2024 Employee HSA Contributions: $3,750
• Used 50 credits which is equivalent to $500.
• Coverage requested: Family
• Additional employee comments: Married, balance in HSA is $30,000, expect to withdraw $10,000 from HSA to pay personal debt (non-medical).

Can John expect to face penalties based on the data mentioned above?

There is no provision in the current tax laws that allows taxpayers to withdraw funds from their HSAs for non-medical expenses and avoid penalties, even if the funds are repaid within two years. To avoid penalties and taxes, it is important to use HSA funds for medical expenses that are qualified.

If HSA funds are withdrawn for non-medical purposes, the withdrawal is subject to income tax and a 20% penalty unless the taxpayer is 65 or older, in which case only the income tax applies.

My Advice for John

I would advise John to avoid a 20% penalty by not withdrawing funds for other purposes other than medical purposes.