If you use a Health Savings Account to pay for your medical expenses, be sure to read these tips and reminders:
- HSA owners must use the dollars in their account for qualified medical expenses. Money withdrawn for an unqualified expense is taxable as income, and if withdrawn before age 65, subject to an additional penalty.
- HSA owners are responsible for determining whether their HSA distributions (withdrawals) are qualified or nonqualified. For specific guidance, please refer to IRS Publication 502, or consult your tax advisor.
- Document your HSA transactions by retaining your receipts and monthly account statements. You may only spend the balance available in your account.
- IRS rules prohibit an extension of credit (overdraft) on HSA accounts. Because of this IRS rule, overdrafts will result in account closure and IRS penalties. Ask about ways to prevent an overdraft on your HSA at your nearest 1st Source Banking Center.
- Once a year, 1st Source will send you a summary of your contributions (deposits) on IRS Form 5498-SA and your distributions (withdrawals) on IRS Form 1099-SA for tax purposes. You must report your use of HSA funds on Form 8889 and file it with your yearly tax documents.
If you would like to open an HSA, visit a conveniently located 1st Source Banking Center.