Questions and Answers
May an individual who has not made an excess HSA contribution treat an HSA distribution that is not used for qualified medical expenses as the return of an excess HSA contribution?
No. According to IRS Notice 2004-50, Q&A 35, a distribution for nonqualified medical expenses is includable in the individual’s gross income under IRC Section 223(f)(2). A 10 percent penalty tax also applies, unless an exception such as disability, death, or reaching age 65 exists.
(Posted: 10/17/2007)
