If you withdrew money from a HSA and it was not for medical expenses it would be taxable, and you would pay a penalty.
- Yes you will have to allocate a portion of your medical expenses to your HSA.
- An HSA may receive contributions from an eligible individual or any other person, including an employer or a family member, on behalf of an eligible individual. Contributions, other than employer contributions, are deductible on the eligible individual’s return whether or not the individual itemizes deductions. Employer contributions aren’t included in income. Distributions from an HSA that are used to pay qualified medical expenses aren’t taxed.
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