Health Savings Acct (HSA) - tax questions

[ua_guy]

I'm hoping there's an easy answer for this one. I had an HSA through a previous employer and had about $5k in there. When I left that employer, there was no suitable rollover option or similar health plan where i could apply funds with my new employer. So, the money sat in the HSA account.

I used that money to pay deductibles and other obvious health expenses that my new plan didn't cover. The HSA money was all saved pre-tax, of course. The question is, since I was not actively enrolled in a HSA health plan but was drawing funds from the account, do I need to pay taxes on that money (even though it was on qualifying expenses)?

[MonkeyMama]

Yes - HSA withdrawals for qualified expenses are fine - doesn't matter if you still have HDHP and nothing to pay tax on.

[MrHSA]

One of the great things about an HSA is that once the money has been deposited in your HSA, it is always available for withdrawal tax-free if used for qualified medical expenses. The fact that you are no longer eligible to add more money to the HSA account does not eliminate your ability to use the funds already deposited in the account. You also have no deadline by which you must withdraw funds from your HSA account.

[JoshuaHeckathorn]

No need to pay any taxes. Keep using the money for qualified medical expenses whenever you want, or simply leave it in there, invest it if possible, and treat it like a separate retirement account. After age 65 you can withdraw those funds with no penalty, and you'll only owe income tax like you would with a regular IRA distribution.