An HSA distribution used for qualified medical expenses is generally tax-free, but the account owner must be able to show what it paid for. The HSA custodian reports distributions on Form 1099-SA; it does not verify that every purchase qualifies. Form 8889 reports HSA activity on the federal return.
Match expenses to distributions
Keep an itemized receipt showing the service or product, date, amount, and person treated. The expense must generally be incurred after the HSA was established, and you cannot use the same expense for both a tax-free HSA withdrawal and another tax benefit. A credit-card statement alone may not show enough detail.
Identify nonqualified withdrawals
A distribution used for a nonqualified expense is generally taxable and may face an additional tax before age 65, disability, or death. Some insurance premiums qualify under specific exceptions, but many do not. Publication 969 explains the distinctions and refers readers to Publication 502 for eligible medical expenses.
Reconcile annual forms
Compare contributions reported by employers and custodians, distributions on Form 1099-SA, and your own receipts. Review eligibility for contributions separately from whether a later withdrawal qualifies. If you spot a mistaken distribution, ask the custodian and preparer about the correction rules rather than silently reclassifying it.
Read more from the IRS
- IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans
- IRS Publication 502, Medical and Dental Expenses
This article provides general educational information, not advice for a particular tax, accounting, legal, or investment situation. Rules and forms can change; review your facts with a qualified professional.