Can someone age 65 use HSA money for a non-medical expense without penalty?

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Multiple Choice

Can someone age 65 use HSA money for a non-medical expense without penalty?

The key idea is how HSA withdrawals are taxed based on age and purpose. Money taken from an HSA for qualified medical expenses is always tax-free, at any age. If you withdraw for non-medical use before age 65, you’d owe ordinary income tax plus a 20% penalty. After age 65, the 20% penalty no longer applies for non-medical withdrawals; you’ll pay ordinary income tax on the amount if it isn’t used for medical expenses. So a 65-year-old can use HSA funds for non-medical expenses without a penalty, but the distribution is taxed as ordinary income unless it’s used for medical expenses.

The key idea is how HSA withdrawals are taxed based on age and purpose. Money taken from an HSA for qualified medical expenses is always tax-free, at any age. If you withdraw for non-medical use before age 65, you’d owe ordinary income tax plus a 20% penalty. After age 65, the 20% penalty no longer applies for non-medical withdrawals; you’ll pay ordinary income tax on the amount if it isn’t used for medical expenses. So a 65-year-old can use HSA funds for non-medical expenses without a penalty, but the distribution is taxed as ordinary income unless it’s used for medical expenses.

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