I used my HSA contributions to pay medical bills and prescriptions. Why is it being included in Other Income?

Forum|Forum|4 months ago
January 21, 2026
3 replies
5 views

From 2022 to 2023 I had an HSA insurance that I contributed over 5k to. I am no longer on the HAS plan and on a PPO plan. All 5K rolled over and is either gaining interest or being used for medical expenses only. Why is it included in Other Income, since the money was earned while on an HSA plan?

Mike9241

Level 15

Did you withdraw the money from your HSA a/c and put it into a non-HSA account? Then it's taxable even if used to pay medical bills. Otherwise, we need more details of what you did and general description of what you did in Turbotax.

If you rolled the money from one HSA to another, there will be no entry for it in TurboTax. You still need to enter the Medical expenses paid

Mike9241

Opus 17

Level 15

@Mike9241 wrote:

Did you withdraw the money from your HSA a/c and put it into a non-HSA account? Then it's taxable even if used to pay medical bills.

This is incorrect. Money is fungible, that means that once you have it in your pocket (bank account, etc.) it loses its "identity" as to where it came from. Suppose you pay for your medical expenses with a credit card or cash at the time of service, and then reimburse yourself later by getting a withdrawal deposited into your checking account. That's perfectly allowable. It would also be allowable if the funds were deposited into a savings or investment account. What matters is that you are remibursed only for qualified expenses, that the qualified expenses occurred after the HSA was opened, and that you only reimburse your out of pocket costs and not the part that was covered by insurance.

@user17690137885

I suspect your problem is that you did not finish the interview. All HSA withdrawals are automatically included in taxable income unless you check the box that says "yes, I only used the money for qualified expenses."

Likewise, all contributions you made in 2025 are automatically added to taxable income until you complete the entire interview and certify that you had eligible HDHP insurance.

Lastly, contributions made via payroll deduction are only reported on your W-2 and detected automatically by Turbotax. In the interview you only report extra contributions you made out of pocket (if you made any). Don't report your payroll deductions again, that can result in a calculation of excess contributions, which is subject to tax and a penalty.

Go back to the HSA section on the income page, and the contribution section on the deduction page, and run all the interview questions. Don't skip around.

MinhT1

Level 15

You said that your HSA funds were rolled over. Were they rolled over to another HSA account toto a normal savings plan?

If they were rolled over to a savings plan (not a HSA account),then the amount rolled over should taxed (plus a 20% penalty) at the time of transfer

If they were rolled to another HSA account, then even if you no longer have HDHP heath plan and no longer contribute to your HSA, you can still use your HSA to pay for qualified medical expenses tax free. When entering your form 1099-SA, make sure to also enter the medical expenses paid with the HSA funds, and there will no tax on the amount.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

Opus 17

Level 15

@MinhT1 wrote:

You said that your HSA funds were rolled over. Were they rolled over to another HSA account toto a normal savings plan?

I think the taxpayer meant they were allowed to keep the funds, they did not expire like an FSA.

If you have money in an HSA, you are allowed to spend it tax-free for medical expenses even if you are no longer eligible to contribute new funds.

However, if the funds were withdrawn from the HSA and put in a different account, then all tax-free protection is lost, and any funds not used for qualified medical expenses are subject to tax and a penalty.

user17690137885Author

Level 2

I think I answered my own question. The reason it is shown as income, is because the IRS wants to know if I used it for anything else but medical expenses. If I select I used for none medical, I would be hit with the 20% tax. Thanks everyone for your commitments.