What is a Qualified HSA funding distribution?
A qualified HSA funding distribution is a direct IRA-to-HSA trustee transfer for an eligible individual with unused HSA contribution room. It is not income, not deductible, and counts against the annual Health savings account limit. The rule is generally once per lifetime, with a narrow same-year second transfer after self-only HDHP coverage changes to family coverage. Individuals must remain HSA-eligible throughout the testing period. If eligibility is denied for reasons other than death or disability, the transfer becomes income and may be subject to a 10% additional tax. Records should show trustees and dates.
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