Yes, you can withdraw money from your HSA, but the rules about what you withdraw it for matter

You can take money out of your HSA at any time. There is no age restriction, no waiting period, and no limit on how often you withdraw. However, the IRS treats HSA withdrawals in two different ways depending on whether you use the money for may have access to medical expenses or for something else. If you withdraw for a may have access to expense, the money comes out tax-free. If you withdraw for any other reason, you pay income tax on that amount plus a 20 percent penalty — unless you are 65 or older, in which case the penalty goes away but the income tax remains.

The key to avoiding the penalty is knowing which expenses count as may have access to. The list is long and specific, and it includes things most people expect (doctor visits, prescriptions, dental work) and things they do not (certain over-the-counter items, some medical equipment, long-term care insurance premiums). Understanding the difference between what qualifies and what does not is the main decision you face as an HSA holder.

Key Takeaways

  • Withdrawals for may have access to medical expenses are tax-free with no penalty at any age.
  • Non-may have access to withdrawals trigger income tax plus a 20 percent penalty before age 65, or income tax alone at 65 and older.
  • may have access to expenses include doctor visits, prescriptions, dental and vision care, medical equipment, and some over-the-counter items, but the IRS maintains a specific list.
  • You can withdraw money directly from your HSA account through your bank or provider, or you can pay out of pocket and reimburse yourself later.
  • Keeping receipts and records of medical expenses is important because the IRS can ask you to prove that withdrawals were for may have access to expenses.

What counts as a may have access to medical expense

The IRS publishes a list of may have access to medical expenses in Publication 969. The broadest categories include doctor and dentist visits, hospital care, prescription medications, and vision and hearing care. may have access to expenses also cover medical equipment like crutches, wheelchairs, and blood pressure monitors; insulin and diabetic supplies; and physical therapy. Certain over-the-counter items may have access to too — bandages, pain relievers, antacids, and allergy medicine are on the list, but only if you have a prescription or a doctor's note saying you need them.

Some expenses that sound medical do not may have access to. Cosmetic procedures, gym memberships, vitamins and supplements (unless prescribed for a specific condition), and most over-the-counter items without a prescription are not covered. Long-term care insurance premiums can may have access to, but only up to a certain amount that changes each year based on your age. If you are unsure whether a specific expense qualifies, the IRS website has a searchable database, or you can ask your HSA provider — they often have a list of common expenses and whether they may have access to.

How to withdraw money from your HSA

The mechanics of withdrawal depend on how your HSA is set up. If your HSA is held at a bank or financial institution, you can usually withdraw money the same way you would from any savings account — through an ATM, a debit card, a check, or an electronic transfer. Some HSAs come with a debit card that you can use directly at the pharmacy or doctor's office. If your HSA is administered through your employer's plan, you may need to submit a withdrawal request through an online portal or by mail.

You do not have to withdraw money at the time you pay for the expense. You can pay a medical bill out of your own pocket and then withdraw from your HSA later to reimburse yourself. This approach can be useful if you want to let your HSA grow and invest the money, or if you want to keep the withdrawal separate from the payment for record-keeping purposes. Either way, you should keep the receipt or invoice showing what the expense was for, because the IRS can ask you to document that a withdrawal was for a may have access to expense.

The tax consequences of non-may have access to withdrawals

If you withdraw money for something other than a may have access to medical expense, you owe income tax on that amount at your regular tax rate, plus a 20 percent penalty. For example, if you withdraw $1,000 for a non-may have access to expense and your tax bracket is 22 percent, you would owe $220 in income tax plus $200 in penalty, for a total of $420. You report this on your tax return, and the penalty is separate from the income tax — you cannot avoid it by claiming the withdrawal as a deduction elsewhere.

The penalty disappears at age 65, but the income tax does not. Once you turn 65, you can withdraw money from your HSA for any reason without the 20 percent penalty. You will still owe income tax on non-may have access to withdrawals, but that is the same tax treatment as a traditional IRA or 401(k) at that age. This is one reason some people treat their HSA as a retirement savings account and try to keep it intact until they are older.

Keeping records and avoiding IRS problems

The IRS does not require you to submit receipts when you withdraw from your HSA, but you must keep them yourself. If the IRS audits your HSA account, they can ask you to prove that withdrawals were for may have access to expenses. If you cannot produce documentation, the IRS will treat the withdrawal as non-may have access to, which means you will owe the income tax and penalty retroactively, plus interest and possibly penalties for underpayment.

The best practice is to keep receipts and invoices organized by year and matched to the withdrawal date. If you reimburse yourself from your HSA weeks or months after paying a medical bill, make a note of the connection so you can explain it if asked. Some HSA providers offer record-keeping tools or allow you to upload receipts to your account, which can make this easier. Even if your provider does not offer this, keeping a simple spreadsheet with the date, amount, provider name, and type of expense is enough to protect yourself.

What happens to money you do not withdraw

HSA money does not expire. Unlike a Flexible Spending Account (FSA), which operates on a use-it-or-lose-it basis, an HSA rolls over year to year. Any money you do not withdraw stays in the account and continues to earn interest or investment returns, depending on how your HSA is invested. This is one of the main advantages of an HSA — it can function as a long-term savings account for medical expenses.

You can also leave money in your HSA indefinitely and withdraw it later for past medical expenses, as long as the expense occurred after you opened the account. For example, you could pay for a dental procedure out of pocket in 2024, leave the money in your HSA untouched, and withdraw it in 2030 to reimburse yourself. The withdrawal is still tax-free because the expense was may have access to, even though years have passed. This flexibility makes HSAs useful for people who want to save for future medical costs without spending the money right away.

Frequently Asked Questions

Can I withdraw HSA money for my spouse or children?

Yes. You can withdraw money from your HSA to pay for may have access to medical expenses for your spouse and dependents, even if they are not covered under your health insurance plan. The expense must still be may have access to, and you should keep documentation showing the relationship and the medical service provided.

What if I withdraw money and then find out it was not a may have access to expense?

You can put the money back into your HSA within a certain timeframe if you discover the withdrawal was not may have access to. Contact your HSA provider about their redeposit policy — some allow it, and some do not. If you cannot redeposit, you will owe income tax and the 20 percent penalty on that amount when you file your taxes.

Do I have to report HSA withdrawals on my tax return?

You receive a Form 1099-SA from your HSA provider showing all withdrawals for the year. You report this on your tax return. If all withdrawals were for may have access to expenses, you do not owe additional tax. If any were non-may have access to, you report the non-may have access to amount and pay income tax plus the 20 percent penalty.

Can I withdraw HSA money to pay health insurance premiums?

You can withdraw to pay for COBRA premiums, premiums while you are receiving unemployment benefits, and long-term care insurance premiums (up to an age-based limit). You cannot withdraw to pay regular health insurance premiums while you are employed, but you can use HSA money to pay out-of-pocket costs like deductibles and copays.