Tax if you don't use a distribution from your HSA for qualified medical expenses

[taxmcp]

I have a client who closed his Health Savings Account in 2021 and received a check for $560.47 for the balance in his account less closure fee. If he doesn't use this distribution from his HSA for qualified medical expenses, In addition to paying tax on the distribution, how much additional tax will he have to pay on the taxable distribution?

[Anarchrist]

Did the taxpayer have any medical expenses in prior years for which he didn't take reimbursement? This distribution may qualify as reimbursing those.

[ATSMAN]

Many HSAs have generous language for use of the money. I have seen one that allows for pedicure if you have brittle nails.

[BOB W]

All non qualified HSA distribution are tax as ordinary income. So whatever you client's tax bracket is that's the amount of tax on the distribution.

[taxmcp]

All non qualified HSA distribution are tax as ordinary income. So whatever you client's tax bracket is that's the amount of tax on the distribution.

Is there not an additional penalty if you don't use the distribution for qualified medical expenses?

[Lion]

Maybe 10% if less than 59.5, but you'll have to look that up.

Can't he come up with $560 of qualified medical expenses? New glasses or prescription sun glasses. Stock up on his usual prescriptions. Annual physical. Chiropractor. Dentist. PT for that aching knee.

[TAXNJ]

Is there not an additional penalty if you don't use the distribution for qualified medical expenses?

You can help yourself with many answers to your scenario by reviewing:

Health Savings Accounts (HSAs). TTB 22-7. Also, See Chart 30-2 and the following pages.

Try it and repost

[Anarchrist]

Can't he come up with $560 of qualified medical expenses? New glasses or prescription sun glasses. Stock up on his usual prescriptions. Annual physical. Chiropractor. Dentist. PT for that aching knee.

OMG, this. How can he not come up w/ $560 of qualified expense. Can even be from a prior year and since 2020 OTC stuff counts.