What happens if I use my distribution to pay for a non-qualified expense?

If you are under 65 years old, you will have to pay ordinary income taxes as well as pay a 20% penalty for the amount your disbursed out of your HSA account.

If you are 65 or older, disabled or die, then you will pay ordinary incomes taxes (no 20% penalty).

If you find yourself in this situation, you can attempt to put money back into your HSA funds before tax time each year.

Source: Internal Revenue Code 223, Health Savings Accounts

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