Distributions from an HSA which are used to pay for qualified medical expenses are not considered taxable income.

Any distribution not used to pay for qualified medical expenses must be reported as regular income when filing taxes and will also be subject to an additional 10 percent tax. After age 65, withdrawals are included in regular income and not subject to the additional 10 percent tax.

Note: Before taking a questionable distribution, it is advisable to consult with your HSA administrator or tax-advisor.