What type of expenses must Health Savings Account (HSA) funds be used for to remain tax-free?

What type of expenses must Health Savings Account (HSA) funds be used for to remain tax-free?

• A. All personal expenses
• B. Qualified medical expenses
• C. Any insurance premiums
• D. Non-medical related expenses

Answer: (B)

Health Savings Account (HSA) funds must be used for qualified medical expenses to remain tax-free. Qualified medical expenses include a wide range of healthcare expenses, such as doctor visits, hospital stays, prescription medications, and preventative care. The Internal Revenue Service (IRS) defines these expenses, and they are intended to promote health-related expenditures that directly contribute to an individual's medical care. Utilizing HSA funds for qualified medical expenses allows the account holder to enjoy tax-deductibility on contributions and tax-free growth and withdrawals, provided the funds are applied appropriately. Spending HSA funds on non-qualified expenses can lead to taxes and potentially penalties, highlighting the importance of adhering to IRS guidelines.

Health Savings Account (HSA) funds must be used for qualified medical expenses to remain tax-free. Qualified medical expenses include a wide range of healthcare expenses, such as doctor visits, hospital stays, prescription medications, and preventative care. The Internal Revenue Service (IRS) defines these expenses, and they are intended to promote health-related expenditures that directly contribute to an individual's medical care.

Utilizing HSA funds for qualified medical expenses allows the account holder to enjoy tax-deductibility on contributions and tax-free growth and withdrawals, provided the funds are applied appropriately. Spending HSA funds on non-qualified expenses can lead to taxes and potentially penalties, highlighting the importance of adhering to IRS guidelines.