Health Savings Accounts (HSAs) cover current and future qualified healthcare costs. Account beneficiaries can make tax-free withdrawals to cover all of the following EXCEPT?

Health Savings Accounts (HSAs) cover current and future qualified healthcare costs. Account beneficiaries can make tax-free withdrawals to cover all of the following EXCEPT?

• A. prescription drugs.
• B. doctor visits.
• C. Medigap expenses.
• D. dental care.

Answer: (C)

Health Savings Accounts (HSAs) are designed to help individuals save for medical expenses on a tax-advantaged basis. The funds contributed to an HSA can be withdrawn tax-free to cover a variety of qualified healthcare costs. The reason why the answer "Medigap expenses" is the only option that does not qualify for tax-free withdrawals is that Medigap policies, which supplement Medicare coverage, are not considered a qualified medical expense under IRS rules. While HSAs can be used for many healthcare-related payments, they specifically do not extend to premiums for Medigap plans, even though those premiums may go towards healthcare costs. In contrast, prescription drugs, doctor visits, and dental care are all recognized as qualified medical expenses. Consequently, withdrawals made from HSAs to cover these costs are tax-free, aligning with the intended use of the account to assist with current and future healthcare needs. Understanding the specific limitations of HSAs is crucial for proper financial planning and compliance with tax regulations related to healthcare expenses.

Health Savings Accounts (HSAs) are designed to help individuals save for medical expenses on a tax-advantaged basis. The funds contributed to an HSA can be withdrawn tax-free to cover a variety of qualified healthcare costs.

The reason why the answer "Medigap expenses" is the only option that does not qualify for tax-free withdrawals is that Medigap policies, which supplement Medicare coverage, are not considered a qualified medical expense under IRS rules. While HSAs can be used for many healthcare-related payments, they specifically do not extend to premiums for Medigap plans, even though those premiums may go towards healthcare costs.

In contrast, prescription drugs, doctor visits, and dental care are all recognized as qualified medical expenses. Consequently, withdrawals made from HSAs to cover these costs are tax-free, aligning with the intended use of the account to assist with current and future healthcare needs. Understanding the specific limitations of HSAs is crucial for proper financial planning and compliance with tax regulations related to healthcare expenses.