HSA 1099-SA Form: How HSA Distributions Are Reported

HSA 1099-SA Form – Health Savings Accounts (HSAs) offer a tax-advantaged way to save for medical expenses, but understanding how distributions are reported is crucial for accurate tax filing. Form 1099-SA plays a key role in this process, providing details on withdrawals from your HSA, Archer Medical Savings Account (Archer MSA), or Medicare Advantage MSA (MA MSA). This guide explains what the form is, how HSA distributions are reported, tax implications, and steps for reporting on your tax return. Whether you’re preparing for the 2025 tax year or beyond, staying informed helps avoid penalties and ensures compliance.

What is Form 1099-SA?

Form 1099-SA is an IRS information return used to report distributions from health savings accounts and similar plans. It documents the total amount withdrawn during the tax year, which could be paid directly to a medical service provider or to the account holder. A separate form is issued for each type of account, such as HSAs, Archer MSAs, or MA MSAs.

The form includes several boxes that break down the distribution details:

  • Box 1: Gross Distribution – Shows the total amount distributed, including any earnings reported in Box 2.
  • Box 2: Earnings on Excess Contributions – Reports earnings from returned excess contributions by your tax return due date.
  • Box 3: Distribution Code – Indicates the type of distribution (e.g., Code 1 for normal distributions, Code 2 for excess contributions, Code 3 for disability).
  • Box 4: FMV on Date of Death – Lists the fair market value of the account if the distribution relates to the account holder’s death.
  • Box 5: Account Type – A checkbox specifying if it’s an HSA, Archer MSA, or MA MSA.

Trustees or custodians of these accounts, such as banks or financial institutions, are required to issue Form 1099-SA if distributions occur during the year. You should receive your copy by January 31 of the following year (e.g., by January 31, 2026, for 2025 distributions).

Who Receives Form 1099-SA and When?

If you took any distributions from your HSA or similar account in the tax year, you’ll receive Form 1099-SA from your account trustee. This includes withdrawals for qualified medical expenses, non-qualified uses, or even mistaken distributions that are later corrected. However, certain transactions aren’t reported, such as trustee-to-trustee rollovers between HSAs or from an Archer MSA to an HSA.

For the 2025 tax year, expect the form for distributions made in 2025, which you’ll use when filing your 2025 taxes in 2026. If no distributions were made, you won’t receive a 1099-SA, though you may get Form 5498-SA for contributions.

How Are HSA Distributions Reported?

HSA distributions are reported as gross amounts on Form 1099-SA, regardless of whether they were used for qualified medical expenses. Qualified distributions – those used for eligible medical costs like doctor visits, prescriptions, or over-the-counter items such as menstrual products and condoms – are tax-free. Non-qualified distributions are taxable and may incur a 20% penalty if you’re under age 65 and not disabled.

Special cases include:

  • Mistaken Distributions: If repaid by your tax return due date due to reasonable cause, they’re not reported on 1099-SA.
  • Death of Account Holder: Distributions after death are coded differently (e.g., Code 6 for non-spouse beneficiaries), and the account may transfer to a spouse or cease to exist.
  • Excess Contributions: Earnings on returned excesses are reported in Box 2.

For 2025, HSA contribution limits are $4,300 for self-only coverage and $8,550 for family, with an extra $1,000 for those 55+. These limits affect how distributions interact with contributions on your return.

Tax Implications of HSA Distributions

Distributions used for qualified medical expenses aren’t included in your gross income. However, non-qualified withdrawals are taxable as ordinary income and subject to a 20% additional tax unless exceptions apply (e.g., after age 65, disability, or death). Prohibited transactions, like using the HSA as loan security, result in deemed distributions that are fully taxable.

Recent updates for 2025 include expanded preventive care under HDHPs, such as no-deductible coverage for telehealth, oral contraceptives, male condoms, and continuous glucose monitors. These changes can make more distributions qualify as tax-free.

How to Report HSA Distributions on Your Tax Return?

Use the information from Form 1099-SA to complete IRS Form 8889, Health Savings Accounts (HSAs), which is attached to your Form 1040. On Form 8889:

  • Enter total distributions from Box 1 of 1099-SA in Part II.
  • Subtract qualified medical expenses to determine the taxable amount.
  • Report any taxable portion as “other income” on Schedule 1 of Form 1040, noting “HSA” beside it.
  • Calculate any 20% additional tax on non-qualified distributions.

File Form 8889 even if your only HSA activity was employer contributions or if you had no distributions but need to report eligibility issues. Keep records of medical expenses for at least three years in case of an audit.

Common Mistakes to Avoid

  • Not Reporting All Distributions: Even tax-free ones must be reported on Form 8889.
  • Missing Deadlines: Contributions for 2025 can be made until April 15, 2026, but distributions are reported based on the calendar year.
  • Ignoring Excess Contributions: These incur a 6% excise tax if not withdrawn timely.

Conclusion

Understanding Form 1099-SA is essential for proper HSA tax reporting. By using distributions for qualified expenses and accurately completing Form 8889, you can maximize tax benefits and avoid penalties. For personalized advice, consult a tax professional or refer to IRS Publication 969 for detailed guidance. Stay updated on changes, as limits and rules evolve annually – for 2026, contribution limits rise to $4,400 self-only and $8,750 family.