Ask the Experts!
The professionals at Advanced Underwriting Consultants (AUC) answer the tax questions posed by producers. Here’s the question of the day.
Question: Are there any penalties for taking a distribution from an HSA? Are there any exceptions?
Answer: Distributions from an HSA are income tax-free if used to pay for or reimburse qualified medical expenses. Qualified medical expenses include those incurred by a spouse and dependents.
Non-qualified distributions are taxed as ordinary income and are generally subject to an additional 20-percent tax. The 20-percent penalty does not apply if the distribution is made after the account beneficiary dies, becomes disabled or reaches age 65.
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