Question

Melody works for a company with only 22 employees. Her employer contributed $2,000 to her health savings account (HSA), and the account earned $100 in interest during the year. Melody withdrew only $1,200 to pay medical expenses during the year. Melody is not required to recognize any gross income from the HSA for the year.

A. True
B. False

Answer 1

The statement is False. Melody does not need to recognize any gross income from her HSA for the year.

Step-by-step explanation:

The statement is B. False.

According to the rules for Health Savings Accounts (HSAs), any contributions made to an employee's HSA are not included in the employee's gross income. However, if an employee withdraws money from their HSA for non-medical expenses, they may be required to include that amount as gross income and pay taxes on it. In the case of Melody, she only withdrew $1,200 from her HSA for medical expenses, which is less than the employer's contribution of $2,000 plus the $100 in interest earned. Therefore, she does not need to recognize any gross income from the HSA for the year.