@jl_brooks wrote:
Thank you for taking the time to answer. 🙂
I was told that the HSA balance is taxed at the year end; however, I didn't find IRS docs to back that up. I only saw taxation for over-contributions and non-healthcare related disbursements - not for correct contributions and fund use.
Correct. Excess (ineligible) contributions are subject to a 6% penalty in the year you make them, and if they remain in your account unspent, the excess contributions are subject to an ongoing 6% penalty until you correct or remove the excess in some way. So in a way, the account balance can be "taxed" if you have past or current excess contributions. But there is no general tax on the account balance. If you contribute eligible funds, they can remain in your account as long as you like, and you can spend them for qualified medical expenses at any time, even if you are not eligible to make new contributions. (Contributions and spending have separate rules.)
