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Some background: The house I was renting was made unlivable due to an apparently exploding sewer pipe and resultant sinkhole. I am currently living in a hotel while looking for a suitable apartment.

I have $2500 USD on a HSA which I rarely use. Using this money towards renting my next apartment would of course be a non-medical expense, for which I would have to pay the 20% tax penalty. In the current situation that feels like a minor problem.

But if were to use the HSA money, I would not want to hide the fact either. How would I inform the IRS that I had used it for a non-medical expense?

user100487
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    I wonder if renters insurance covers such motel expenses. Then you’d have more for rent. – RonJohn Jan 25 '23 at 02:38
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    It may also be that the landlord has to cover that – littleadv Jan 25 '23 at 02:47
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    Yeah, landlord should cover it (for not delivering their side of the contract - a livable dwellng). – R.. GitHub STOP HELPING ICE Jan 25 '23 at 05:27
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    @R..GitHubSTOPHELPINGICE Not in most places. You are entitled to stop paying rent and a refund of the partial month from the day the apartment became uninhabitable. You should also get unearned rent (last month's rent) and your deposit back (with justified deductions). This will all go to the new place, so in theory you'd break even. The landlord isn't typically liable for other damages like hotel and restaurants and moving expenses. Renter's insurance loss of use coverage exists for this very reason. – user71659 Jan 25 '23 at 19:51
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    @user71659: The contract most likely requires the landlord to give notice well in advance of cancellation. Expenses between notice of cancellation (or becoming unusable without notice) and the end of contract are all the landlord's responsibility. And even after the contract ends, there's a proper process for eviction. "Constructive eviction" is illegal. – Ben Voigt Jan 25 '23 at 19:57
  • @BenVoigt First, if the lease ran out and is month-to-month, your theory is only going to provide weeks. "Well in advance" is typically 30 days, by local statute anyway. Second, if the issue was not due to the landlord's negligence, then they have a force majeure argument. This isn't an eviction, the house became uninhabitable. I bet any contract disclaims consequential damages. Again, don't assume what you say is true, this is exactly why there's loss of use coverage on insurance. – user71659 Jan 25 '23 at 20:01
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    @BenVoigt In fact, I just looked up my state's "standard" rental agreement and there's a specific clause that says what I said: if the premises become completely uninhabitable not due to negligence of the tenant, then you get your partial month's rent back and the agreement terminates and that's it. – user71659 Jan 25 '23 at 20:10
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    Can you get a loan instead of drawing on the HSA? 20% is a whole lot, you should hopefully be able to borrow some money cheaper than that. – TooTea Jan 25 '23 at 23:26
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    Keep in mind that in addition to the 20% penalty, you also need to pay regular income tax at your tax rate. So, depending on your tax bracket, you would probably pay around half of what you take out to the government. – Ben Miller Jan 26 '23 at 14:33
  • While your apartment is unlivable you should not be paying rent. – DJClayworth Jan 26 '23 at 15:46
  • @DJClayworth, The money would be for renting my next apartment (first, last, and security). I updated the question text to clarify that. Thank you! – user100487 Feb 01 '23 at 14:41
  • @TooTea, I asked and my HSA does not provide a loan option. But thank you for the tip. – user100487 Feb 01 '23 at 14:42
  • @BenMiller-RememberMonica Thank you for bringing that up. I have not withdrawn the funds yet as am looking for other options. – user100487 Feb 01 '23 at 14:53
  • @RonJohn, the renters insurance will reimburse me for the hotel stay up to a limit so that is a good point. – user100487 Feb 01 '23 at 14:54
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    @TooTea didn't say a loan from the HSA; that's not allowed -- nor using it for collateral; both of those also apply to IRAs, although for both you can get a 60-day pseudoloan by doing a rollover (as littleadv noted). In addition to loan-making businesses like banks, if you have an employer plan like 401k that allows loans, aside from 'time out of the market' your net cost is only 'reasonable' interest 'similar to' a secured bank loan, which is usually slightly over prime rate -- and you pay it to your own account, effectively to yourself. – dave_thompson_085 Feb 03 '23 at 04:49

1 Answers1

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You'll attach form 8889 to your tax return, the specific parts you'll need to fill are in Part II of the form (line 17).

littleadv
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