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Old 10-26-2009, 12:35 AM
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Under what circumstances are Health Savings Account (HSA) distributions tax-free?

Health Savings Account (HSA) distributions are tax-free if they are used to pay qualified medical expenses. The following are some of these medical expenses and include the following:
  1. Prescription drugs
  2. Diagnosis, cure, treatment, mitigation, or prevention of disease costs
  3. Continuation coverage required by federal law
  4. Qualified long-term care services
  5. Qualified long-term care insurance
  6. Health insurance for the unemployed
  7. Medicare expenses (not Medigap)
  8. Retiree health expenses for individuals age 65 or older
However, any distributions that are made for any other purpose are taxable and have a 10 percent penalty. This 10 percent penalty is waived for distributions made by individuals age 65 or older

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