Medical expenses you can pay for with HSA funds

A Health Savings Account (HSA) lets you pay for a wide range of medical, dental, and vision costs without paying income tax on the money you spend. The IRS maintains a detailed list of what counts as a may have access to medical expense, and the rules are broader than many people expect.

You can use HSA funds to pay for doctor visits, hospital stays, surgery, prescription medications, and mental health treatment. Dental work — including cleanings, fillings, root canals, and orthodontia — is covered. Vision expenses like eye exams, glasses, contact lenses, and LASIK surgery all count. You can also pay for hearing aids, medical equipment like crutches or wheelchairs, and over-the-counter medications (though only if you have a prescription for them).

Less obvious expenses that may have access to include physical therapy, chiropractic care, acupuncture, and certain fertility treatments. If your doctor prescribes a medical device or treatment, it typically qualifies even if it is not something you would normally think of as medical. The key test is whether a doctor ordered it to treat or prevent a medical condition.

Key Takeaways

  • You can use HSA funds to pay for doctor visits, prescriptions, dental work, vision care, and medical equipment without owing income tax on the withdrawal.
  • Over-the-counter medications only count if you have a written prescription from a doctor, even for common items like pain relievers or allergy medicine.
  • Cosmetic procedures, gym memberships, and general wellness products do not count, even if they improve your health.
  • You can pay for a spouse's or dependent's medical expenses with your HSA, even if they are not on your health plan.
  • If you withdraw money for something that does not count as a may have access to expense, you owe income tax plus a 20 percent penalty on that amount.

Over-the-counter medications and supplies

The rules for over-the-counter (OTC) products changed in 2020. You can now use HSA funds to buy OTC medications without a prescription — items like pain relievers, cold medicine, allergy pills, and antacids. You do not need a doctor's order for these anymore.

However, OTC items that are not medications do not count. Sunscreen, toothpaste, shampoo, and vitamins (unless prescribed by a doctor for a specific deficiency) are not covered, even though they relate to health. The distinction is whether the product is classified as a drug by the FDA, not whether it helps you stay healthy.

Expenses that do not count

Cosmetic procedures are not covered unless they treat an injury or medical condition. Botox or a facelift for appearance does not count, but reconstructive surgery after an accident or burn does. The same rule applies to teeth whitening (cosmetic) versus a crown to repair a damaged tooth (medical).

Gym memberships, fitness classes, and general wellness programs do not count, even if your doctor recommends exercise. Nutritional supplements and vitamins are not covered unless a doctor prescribes them to treat a diagnosed deficiency. Long-term care insurance premiums are not covered, though some may have access to long-term care insurance does count under specific rules.

Health insurance premiums themselves are generally not covered, with narrow exceptions: you can use HSA funds to pay COBRA premiums, premiums while you are receiving unemployment benefits, and Medicare premiums (Part A, B, D, and some supplemental plans) once you turn 65.

Paying for family members' medical costs

You can use your HSA to pay for medical expenses of your spouse and any dependent you claim on your tax return, even if they are not covered by your health plan. You do not need to be on the same insurance policy. This means if your spouse has their own health plan or no plan at all, you can still use your HSA to cover their doctor visits, prescriptions, and dental work.

The dependent must be someone you claim as a dependent on your federal tax return. Adult children who are not dependents do not count, even if you help pay their medical bills. If you are unsure whether someone qualifies as your dependent, check your most recent tax return or consult a tax professional.

What happens if you use HSA funds incorrectly

If you withdraw money from your HSA for something that does not count as a may have access to medical expense, you owe income tax on that amount plus a 20 percent penalty. The penalty is in addition to the tax, not instead of it. For example, if you withdraw $500 for a non-may have access to expense and you are in the 22 percent tax bracket, you would owe $110 in income tax plus $100 in penalty — a total of $210 on that $500.

You are responsible for tracking what you spend and making sure it qualifies. The bank or plan administrator does not police your purchases. However, if you keep receipts and records, you can show that an expense was medical if the IRS ever questions it. After age 65, the penalty goes away — you can withdraw money for any reason, though you still owe income tax on non-medical withdrawals.

Keeping records and receipts

The IRS does not require you to submit receipts when you withdraw HSA funds, but you must keep them for your records. If you are audited, you need to show that the money went to may have access to expenses. Many people photograph receipts or save them in a folder, either physical or digital.

Some HSA administrators offer a debit card that lets you pay directly from the account at pharmacies and doctor's offices. Others require you to pay out of pocket and then request reimbursement. Either way, keep the receipt. You can also reimburse yourself years later — there is no time limit on when you claim a past medical expense, as long as you have the receipt and the expense occurred after you opened the account.

Frequently Asked Questions

Can I use my HSA to pay for my partner's medical expenses if we are not married?

No. You can only use HSA funds for your own expenses or those of your spouse and tax dependents. An unmarried partner does not count, even if you live together or share finances. If you want to help pay their medical bills, you would need to do so with after-tax money.

Are prescription glasses and contact lenses covered?

Yes. Eye exams, glasses, contact lenses, contact lens solution, and corrective eye surgery like LASIK all count as may have access to expenses. You can use HSA funds at an optometrist or ophthalmologist, or buy glasses and contacts online or at a retail store.

Can I use my HSA to pay for therapy or counseling?

Yes, if it is provided by a licensed mental health professional treating a diagnosed condition. Therapy, psychiatry, and counseling all count. However, life coaching or general wellness counseling that is not treating a medical or mental health condition does not count.

What if I use my HSA card at a store and buy both medical and non-medical items?

You are responsible for tracking which items were medical. If you buy a prescription and a magazine at a pharmacy, you can only reimburse yourself for the prescription. Keep the receipt and note which items were may have access to expenses. If you are unsure, pay with a different payment method for non-medical items.

Can I withdraw HSA money and use it for rent or other living expenses?

You can withdraw the money, but you will owe income tax plus a 20 percent penalty on the full amount. The HSA is designed specifically for medical expenses. If you need the money for other reasons, you can take it out, but the tax and penalty make it an expensive way to access cash.