What happens when I make a distribution from my HSA?

As long as the money is used for qualified medical expenses, it will be tax-free 1 (ALWAYS keep your receipts!)

If you are below 65 and you take a distribution for anything other than a qualified medical expense, you have to pay a 20% penalty and ordinary income taxes on that amount. If you are 65 or older, you don’t pay the penalty, but you will have to pay income taxes on it 2.

1:IRC Sec. 223(f)(1)
2:Publication 969 (2018), Health Savings Accounts and Other Tax-Favored Health Plans.

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