Submitted By: John
Answered: July 16, 2013 8:30 am

I contributed $3,000 to a health savings account (HSA) and took distributions of $2,000. How do I report this?

Contributions to an HSA are deductible from gross income (page 1 of Form 1040) even if you don’t itemize other deductions. You must file Form 8889 with your return if you had any activity in the account for the year—contributions in Part I and/or distributions in Part II. Distributions are not taxed if you used the money to pay qualified medical costs not covered by insurance. If you used the money for anything else, you’re taxed on the distribution and, if under age 65, subject to a 20% penalty reported on Form 5329.

Tax Glossary


An amount taken from income as a prepayment of an individual’s tax liability for the year. In the case of wages, the employer withholds part of every wage payment. Backup withholding from dividend or interest income is required if you do not provide the payer with a correct taxpayer identification number. Withholding on pensions and IRAs is automatic unless you elect to waive withholding.

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