Distributions from an HSA are non-taxable when the funds are spent for what purpose?

Distributions from a Health Savings Account (HSA) are considered non-taxable when the funds are used for qualified medical expenses. This includes expenses incurred for medical care, as defined by the IRS, for the account holder, their spouse, or dependents. Since dependents can also be eligible for these expenses, using HSA funds for qualified medical expenses of a dependent allows the account holder to take advantage of the tax-free nature of these distributions.

Qualified medical expenses typically include costs for medical services, prescription drugs, and various healthcare items that are necessary for treatment. By utilizing HSA funds in this way, account holders can effectively reduce their overall taxable income, making it a beneficial tax strategy.

The other choices involve expenses that do not meet the criteria established by the IRS for non-taxable HSA distributions. Retirement savings and educational expenses do not qualify, as they are not considered medical care, and home purchases also do not satisfy the requirements for HSA fund usage.