Under which condition are distributions from an HSA taxable?

Distributions from a Health Savings Account (HSA) are generally tax-free when used for qualified medical expenses. However, if the funds are not utilized for these eligible expenses, the distributions become taxable. This is a key feature of HSAs, designed to incentivize saving for health-related costs. When HSA distributions are not used for qualified medical expenses, they are subject to income tax, and if the account holder is under the age of 65, there is also an additional penalty. Therefore, the condition specified is directly tied to the tax implications of HSA distributions.

Other conditions, such as the amount of the distribution exceeding a certain limit, the age of the beneficiary, or rolling over the funds to another account, do not inherently cause the distribution to be taxable. The essential factor remains the usage of the funds in relation to qualified medical expenses.