HSA funds cover medical expenses the IRS defines as may have access to

An HSA (Health Savings Account) lets you spend the money on medical, dental, and vision costs that you would otherwise pay out of pocket. The IRS publishes a specific list of what counts as a may have access to medical expense. If an expense is on that list, you can pay for it with HSA funds without owing taxes on the withdrawal. If it is not on the list, you can still withdraw the money, but you will owe income tax plus a 20 percent penalty.

The key rule: the expense must be for diagnosis, treatment, or prevention of a disease or condition. Cosmetic procedures, gym memberships, and over-the-counter vitamins do not may have access to, even if they improve your health. But the list is longer than most people think, and it includes things beyond what your health insurance covers.

You do not have to use HSA money only for yourself. You can pay may have access to expenses for your spouse and any dependent you claim on your tax return, even if they are not covered by your HSA-may be able to access health plan.

Key Takeaways

  • may have access to medical expenses include copays, deductibles, prescription drugs, dental work, glasses, hearing aids, and mental health treatment.
  • Over-the-counter medications now require a prescription from a doctor to be HSA-may be able to access, even common ones like pain relievers and allergy medicine.
  • You can use HSA funds for family members' medical costs, not just your own, as long as they are your spouse or tax dependents.
  • Withdrawals for non-may have access to expenses trigger income tax plus a 20 percent penalty, so it is worth checking the IRS list before you spend.
  • HSA money rolls over year to year and never expires, so you can save it for future medical costs or retirement.

Medical, dental, and vision expenses that HSA covers

Copays, coinsurance, and deductibles for any doctor visit, hospital stay, or medical procedure count as may have access to expenses. This includes urgent care, emergency room visits, and surgery. You can also use HSA funds to pay your monthly health insurance premium if you are receiving unemployment benefits, though not for other types of insurance premiums.

Prescription medications are covered. Over-the-counter drugs now require a prescription to be HSA-may be able to access — this changed in 2020. So ibuprofen, allergy medicine, cold medicine, and antacids need a doctor's written prescription, even if your pharmacy sells them without one. You can ask your doctor to write a prescription for over-the-counter drugs you already take regularly; many will do this at no charge.

Dental work is fully covered: cleanings, fillings, root canals, crowns, orthodontia, and tooth extraction. Vision expenses include eye exams, glasses, contact lenses, and contact lens solution. Hearing aids and hearing tests are covered. Mental health treatment — therapy, counseling, and psychiatric visits — counts as a may have access to expense.

Other common may have access to expenses: lab tests and X-rays, physical therapy, chiropractic care, acupuncture, medical equipment like crutches or wheelchairs, insulin and diabetes supplies, and birth control prescribed by a doctor.

What HSA does not cover

Cosmetic procedures are not covered unless they treat an injury or disease. Botox and teeth whitening do not may have access to. A nose job is not covered unless it is medically necessary to correct a breathing problem. Hair transplants are not covered.

General health and wellness expenses do not may have access to: gym memberships, fitness classes, diet programs, vitamins, and supplements. Sunscreen is not covered. Toothpaste and mouthwash are not covered. Maternity clothes are not covered, though prenatal care and delivery are.

Insurance premiums are generally not covered, with the exception noted above for unemployment. You cannot use HSA funds to pay your health insurance premium, dental insurance premium, or vision insurance premium while you are employed. Long-term care insurance premiums are not covered either.

Travel to get medical care — airfare, hotels, meals — is not covered, even if you travel for a specific treatment. Childcare while you attend a medical appointment is not covered.

How to know if a specific expense qualifies

The IRS maintains a searchable list of may have access to medical expenses on its website. Your HSA provider (the bank or financial company that holds your account) also publishes a list of common expenses and whether they are covered. Before you spend HSA money on something unusual, check both sources or call your HSA provider's customer service line.

If you are unsure, you can also ask your doctor. If a doctor prescribes or recommends something, it is more likely to be HSA-may have access to than if you buy it on your own. A prescription from your doctor is often the deciding factor for over-the-counter items.

Keep receipts and documentation for all HSA withdrawals. The IRS does not require you to submit proof when you withdraw the money, but you must be able to show that the expense was may have access to if you are audited. Documentation should include the date, the provider's name, what service or product you received, and the amount paid.

Using HSA funds at the pharmacy and doctor's office

Most HSA accounts come with a debit card you can use at pharmacies, doctor's offices, and hospitals. When you swipe the card, the transaction is flagged as a medical expense. Some merchants will ask you to verify that the purchase is for a may have access to expense; answer honestly, because false claims can trigger an audit.

If your HSA provider does not issue a debit card, you can pay out of pocket and then request reimbursement from your HSA. You submit a receipt and a form to your HSA provider, and they send you a check or transfer the money to your bank account. This process usually takes one to two weeks.

Some employers offer HSA accounts through a payroll deduction system where the money comes out before taxes. In that case, you may have a different process for accessing the funds — check with your employer's benefits office or your HSA provider for details.

HSA money for retirement and future medical costs

Unlike a flexible spending account (FSA), HSA money does not expire at the end of the year. Any balance you do not spend rolls over to the next year, and the year after that. You can save HSA funds for decades and use them whenever you need to pay a may have access to medical expense.

After age 65, you can withdraw HSA money for any reason without the 20 percent penalty. You will still owe income tax on non-medical withdrawals, but the penalty goes away. This makes an HSA a useful retirement savings tool if you have the option to contribute to one.

Some people use HSA funds to pay medical expenses in retirement, when healthcare costs are typically higher. Others save the receipts from medical expenses paid out of pocket during their working years, then reimburse themselves from the HSA years later. This strategy lets the HSA grow tax-free for as long as possible.

Frequently Asked Questions

Can I use my HSA to pay for my spouse's medical expenses?

Yes, as long as your spouse is your tax dependent. You can use HSA funds for any family member you claim on your tax return, including children, parents, or other dependents. The person does not have to be covered by your health plan.

Do I need a prescription for every over-the-counter medicine?

Yes, as of 2020. Common over-the-counter drugs like ibuprofen, allergy medicine, and antacids now require a doctor's prescription to be HSA-may be able to access. You can ask your doctor to write a prescription for medications you take regularly; most will do this at no cost.

What happens if I use HSA money for something that is not may have access to?

You will owe income tax on the withdrawal amount plus a 20 percent penalty. For example, if you withdraw $100 for a non-may have access to expense and you are in the 22 percent tax bracket, you will owe $42 in taxes and penalties. Keep receipts so you can prove the expense was may have access to if audited.

Can I use HSA money to pay my health insurance premium?

Not while you are employed. You cannot use HSA funds to pay your health insurance, dental insurance, or vision insurance premiums. The only exception is if you are receiving unemployment benefits — then you can use HSA money to pay your health insurance premium.

Does HSA money expire if I do not use it?

No. HSA funds roll over year to year with no limit. You can save the money for future medical expenses, retirement, or any may have access to expense. After age 65, you can withdraw HSA money for any reason without penalty, though you will owe income tax on non-medical withdrawals.