Question

Nonqualified medical expense distributions from a HSA have tax penalty of:________

Answer 1

Distributions from an HSA for nonqualified medical expenses incur a 20% tax penalty in addition to income tax on the withdrawn amount.

Step-by-step explanation:

Nonqualified medical expense distributions from a Health Savings Account (HSA) have a tax penalty of 20%. This means if you take money out of your HSA for non-medical expenses before you turn 65, you will not only pay income tax on the amount distributed but also face a 20% penalty. The funds within an HSA are meant to be used exclusively for qualified medical expenses to maintain their tax-advantaged status.