HSA Distribution

[Bird Legs]

This is the first time I have had this.
Client, self employed, took a distribution from her HSA account to reimburse
herself for medical expenses she had paid.
She received a form 1099-SA reporting the $900. distribution in box 1.
This distribution will not be taxable to client, however, are the medical expenses
reduced by this amount, $900.?
Also, the HSA Fair Market Value Report shows 2006 earnings in box 6, $8. This is not
reported as income is it.?
Thanks

[Jesse]

She received a form 1099-SA reporting the $900. distribution in box 1.
This distribution will not be taxable to client, however, are the medical expenses
reduced by this amount, $900.?
If the $900 was a qualified HSA at the time of contributions it was an adjustment to gross income so in that respect "pre-tax" dollars so medical deduction.

Also, the HSA Fair Market Value Report shows 2006 earnings in box 6, $8. This is not
reported as income is it.?
No, not for federal.

State laws might differ - Wisconsin you do not get to take a deduction for HSA so you can take a deduction for the medical and any interest the HSA receives is added to income as well.

[veritas]

The medical expenses

are paid directly from the HSA account which is pretax. So you can't deduct the $900 twice. The interest income is not taxable.


These accounts are becoming more and more common.

[Bird Legs]

Veritas, Question

This is a qualified HSA Plan. She made a qualifying contribution to the plan .
Question: Client said she took a distribution from the HSA as a reimbursement
for the medical expenses she paid out of pocket.
Does this change anything?
Thanks for all responses.

[veritas]

Distributions From an HSA

from pub 969

You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 10% tax. You do not have to make distributions from your HSA each year.

[Jesse]

State laws might differ - Wisconsin you do not get to take a deduction for HSA so you can take a deduction for the medical and any interest the HSA receives is added to income as well.

Sorry - I was referring to Wisconsin's treatment of the interest and just meant to caution Bird Legs that his State might treat the HSA differently - then again it might not.

[Bird Legs]

Thanks to

both of you, Jesse & Veritas. Appreciate your response.
Jesse, there is no personal state income tax in Tx.