topic People recommend investment with HSA money. Does that mean I pay 20% penalty if I do that? i.e) $4000 from HSA money. will I pay $800 since it's not a medical expense? in Deductions & credits

People recommend investment with HSA money. Does that mean I pay 20% penalty if I do that? i.e) $4000 from HSA money. will I pay $800 since it's not a medical expense?

jetulis — Thu, 06 Jun 2019 14:40:44 GMT

I had $4700 with my ex company HSA account. And it was just consuming $8 or so for maintenance fee. So, I thought I could use this money to invest and recover those maintenance fees.

So, I transferred $4000 to the investment account (they're the same company). Now, I got 1099-SA and it says $4000 as gross distribution. Am I paying 20% penalty?

When people say investment with HSA money, does that imply 20% penalty since investment is apparently not medical related category.

Can I repay ?

Some HSA accounts have investment options within the HSA...

Opus 17 — Thu, 06 Jun 2019 14:40:45 GMT

Some HSA accounts have investment options within the HSA account. However, it sounds like you withdrew the money from the HSA to invest in a separate investment account. In that case you have an unqualified withdrawal and oh the penalty.

If you believe that you invested the money within the HSA, then you should not have received a 1099 form and you would need to call the bank to figure out whether they reported it correctly or not.