Any HSA withdrawal you make without a qualified medical expense will be subject to income taxes. In addition to the income tax, you'll have to pay an additional 20% tax on the withdrawal.
Thanks for the quick reply; only, I was looking for a math formula beyond the 20% constant and description. I think what I'm asking is how to *calculate* the final number I'm looking for. I understand that I will have a tax liability added to my gross annual income but I don't know whether that will be based on the total number I withdraw or the total number I receive. If, for example, my HSA had $5,000 in it, my 20% penalty would be $1,000 and I would receive $4,000. In February, when I'm filing, would I end up reporting $4,000 in additional income or $5,000 in additional income?
If you are under age 65 at the time of the distribution and you take $5,000 out of the HSA for nonqualified expenses, you'll owe a $1,000 penalty in addition to the incremental income tax liability on $5,000 of ordinary income.
@dascream00 - the HSA is going to send you the entire $5000 and you would report the entire $5000 as income on your tax return; the taxes and penalties will be calculated via the tax return.