Distributions

HSA distributions are tax free if they are used to pay for qualified medical expenses as defined in Section 213(d). These may include the following:

• Amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease
• Prescription drugs
• Qualified long-term care services and long-term care insurance
• Continuation of coverage required by Federal law (i.e. COBRA)
• Health insurance for the unemployed
• Medicare expenses (but not Medigap)
• Retiree health expenses for individuals age 65 and older

Distributions made for any other purpose are subject to income tax and a 10% penalty. The 10% penalty is waived in the case of death or disability or for distributions made by individuals over the age of 65.