When you have a Health Savings Account, it means that you have a trust account that can pay for the additional medical expenses that you have. These medical expenses should be under your high deductible plan to qualify for the Health Savings Account or HSA. This is because your HDHP will not cover any additional medical expenses for you.
When you have Health Savings Account, you should also expect to have tripe tax advantages as well as tax exemptions when it comes to contributions, distributions, and earnings. If you want to get the latest exemption, you need to follow the rules on how you should spend the Health Savings Account funds.
The Rules For Distribution In Health Savings Accounts
You can also find employers that would offer HSA programs have almost no involvement when it comes to these distributions. Most Health Savings Account owners have liberty when to use the funds. It’s the job of the custodian or the trustee to track and report all of the Health Savings Accounts’ activity.
Then again, there are also other rules that could affect the employers what’s important is that you’re aware of what a Health Savings Account distribution and how it works. Health Savings Accounts can work well if you know how to use them properly. However, if there is any part of the distribution which is not used according to how they should be, then it the account can be taxed
What Happens When The Health Savings Account Becomes Taxable?
If the Health Savings Account distribution become taxable, it means that there’s a 20% penalty for the owner unless he or she is disabled, over the age of 65 or deceased. You can always go online to check which distributions are taxable and which ones are subjected to 20%.
There are plenty of charts online that you can check out. It matters that you are aware of when your Health Savings Account will be taxable and what are the boundaries you should not be stepping on. The Health Savings Account funds that you have should be approved by the custodian or the trustee. If the money enters the Health Savings Account, it means that the owner has full access and control over it.
If your employer funds your Health Savings Account, it means that your account can’t make any trustee or custodian refund the money. The custodian nor the employer will not have any power over how the Health Savings Account distributions are used by the owner.