Fill out IRS Form 8889 by deducting contributions to your health savings account and reporting the distributions made, explains TurboTax. It is also necessary to calculate tax and penalties on any withdrawals made for non-medical purchases.Continue Reading
A Health Savings Account allows you to make $3,300 in tax-deductible contributions for an individual plan, or $6,550 for family plans, as of 2014, according to TurboTax. If you are age 55 or older, you are allowed to make an additional $1,000 in tax-deductible contributions as a catch-up contribution. This money can be used to pay out-of-pocket medical expenses, and the money grows as long as it is held in the account and used only to pay for qualified medical expenses. These expenses can also be tax-free, but only if you file Form 8889 with your tax return. The final calculated deduction from Form 889 is listed on the first page of your income tax return as an adjustment to your income.
It is acceptable to use the money to pay for long-term care insurance and Medicare expenses such as co-pays, coinsurance and deductibles, notes TurboTax. Taxes and an additional 10-percent penalty are due on withdrawals made for non-medical purposes. It is necessary to file Form 8889 in any year that you or your employer contributes money to your health savings account, and whenever you make withdrawals from the account.Learn more about Taxes