Question

Qualified payments for tax-free HSA withdrawals include:

1) Medical expenses
2) Health insurance premiums
3) Prescription drugs
4) All of the above

Answer 1

Tax-free withdrawals from HSAs can be made for qualified medical expenses, which include medical expenses, prescription drugs, and in certain cases, health insurance premiums. However, generally, health insurance premiums are not eligible unless certain conditions apply.

Step-by-step explanation:

Health Savings Accounts (HSAs) allow for tax-free withdrawals when the funds are used for qualified medical expenses. Qualified payments include a variety of healthcare-related expenses. Specifically, they encompass:

• Medical expenses such as physicians' services, eyeglasses, eye care, and hospital services.
• Prescription drugs, which include medications prescribed by a healthcare provider.

However, health insurance premiums are generally not considered a qualified medical expense for tax-free HSA withdrawals, with some exceptions, such as premiums for long-term care insurance, health care continuation coverage (such as COBRA), health care coverage while receiving unemployment compensation, and Medicare premiums and out-of-pocket expenses. In the program's more substantial part, individuals pay an annual premium and deductible, and then the federal government may pay a significant portion of their prescription drug costs.