[USER]

If you invest the money in your Health Savings Account (HSA)—for example, by buying mutual funds or ETFs—and later need to use that money for a qualified medical expense, will you have to pay taxes when you sell those investments to cover the cost?

I’m trying to understand how taxes work in this situation. I know HSAs offer tax advantages, but I’m unsure whether selling invested funds (which may have gains or losses) to pay for a medical expense triggers any kind of tax event.

Does the purpose of the withdrawal (being for a qualified medical expense) make the sale of the investment tax-free?

Or is there still capital gains tax involved when liquidating those investments, even though the money stays inside the HSA?

Would love to hear how others handle this or if anyone has experience with this kind of situation.

Thanks!

[Gary]

No, the money goes in tax free, grows tax free and pays out tax free for medical expenses.

I sell health insurance, so talk clients theory this all the time.

[Skippy]

HSA’s are triple tax protected. Goes in tax free, grows tax free and used tax free.

I have two HSA’s. One at the employer for expenses and the second with Fidelity for investments.

[John]

This is the purpose of an HSA, to be able to pay for medical expenses tax free.

So, no taxes due, as long as the expenses are medical related.

[Author]

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