HSA-may be able to access Expenses: The Basic Rule

An HSA (Health Savings Account) can pay for medical, dental, and vision expenses that the IRS defines as may have access to. The rule is straightforward: if a doctor, dentist, or other licensed provider charges you for diagnosis, treatment, or prevention of a health condition, it is usually HSA-may be able to access. The expense must be for you, your spouse, or a dependent you claim on your tax return.

The IRS publishes a list of what counts. You do not need permission from your HSA provider before you spend the money — you just need to keep receipts and know the rule. If you pay for something that turns out to be ineligible, you can still withdraw the money, but you will owe income tax on it plus a 20 percent penalty (unless you are over 65 or disabled, in which case you owe only the income tax).

Key Takeaways

  • Doctor visits, prescriptions, dental work, and vision care are HSA-may be able to access if they treat or prevent a diagnosed or suspected health condition.
  • Over-the-counter medicines and medical supplies now require a prescription from a doctor to be HSA-may be able to access, with narrow exceptions for insulin.
  • Cosmetic procedures, gym memberships, and general wellness products are not HSA-may be able to access even if they improve your health.
  • You can use HSA money to pay deductibles, copays, and coinsurance, but not health insurance premiums (except COBRA, long-term care, or coverage while unemployed).
  • Keep all receipts and invoices — the IRS can audit HSA withdrawals up to seven years after you make them.

Medical Expenses That Are Always may be able to access

Doctor office visits, including preventive care and annual physicals, are HSA-may be able to access. This includes urgent care and emergency room visits. Mental health counseling and therapy sessions with a licensed therapist or psychiatrist count. Prescription medications are may be able to access. Hospital stays, surgery, and anesthesia are may be able to access. Lab tests, X-rays, and imaging (CT scans, MRI, ultrasound) are may be able to access.

Dental work is HSA-may be able to access: cleanings, fillings, root canals, extractions, orthodontia, and dentures all count. Vision care is HSA-may be able to access: eye exams, glasses, contact lenses, and laser eye surgery (LASIK) all count. Hearing aids and hearing tests are may be able to access. Medical equipment like crutches, wheelchairs, blood pressure monitors, and glucose meters are may be able to access. Insulin and other injectable medications are may be able to access.

Over-the-Counter Items: What Changed and What Still Works

As of January 1, 2020, over-the-counter medicines and medical supplies require a prescription from a doctor to be HSA-may be able to access. This means you can no longer buy ibuprofen, cold medicine, allergy pills, or antacids with HSA money unless a doctor writes a prescription for them. The same rule applies to bandages, thermometers, and most other OTC medical supplies.

Insulin is the major exception: you can buy insulin over the counter without a prescription and still use HSA money. Menstrual products (pads and tampons) became HSA-may be able to access in 2020 and do not require a prescription. If you have a prescription for an OTC item, keep the prescription with your receipt — you may need it if the IRS audits your account.

What Is Not HSA-may be able to access

Cosmetic procedures are not may be able to access unless they treat an injury or deformity. Botox, teeth whitening, and elective plastic surgery do not count. Gym memberships and fitness classes are not may be able to access, even if a doctor recommends exercise. General wellness products like vitamins, supplements, and herbal remedies are not may be able to access unless a doctor prescribes them for a specific diagnosed condition.

Health insurance premiums are generally not HSA-may be able to access, with three exceptions: COBRA continuation coverage, long-term care insurance premiums, and health insurance premiums you pay while you are unemployed and receiving unemployment benefits. Cosmetic dentistry (veneers, whitening) is not may be able to access. Maternity clothes, baby formula, and childcare are not may be able to access. Toiletries and hygiene products (toothpaste, soap, shampoo) are not may be able to access.

Deductibles, Copays, and Coinsurance

You can use HSA money to pay your health insurance deductible. You can use it to pay copays (the flat fee you pay at a doctor visit). You can use it to pay coinsurance (your share of the cost after insurance pays its part). You can use it to pay out-of-pocket maximums. These are all considered may have access to medical expenses.

The one major exception is health insurance premiums themselves. You cannot use HSA money to pay your monthly or annual insurance premium, with the three exceptions noted above (COBRA, long-term care, and unemployment). If you are unsure whether a charge from your insurance company is a premium or a cost-sharing amount, call the insurer and ask — they can tell you exactly what the charge is for.

Dependent Coverage and Family Expenses

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 insurance. You do not need to be on the same insurance plan. If your spouse has their own HSA, they can use their own account for their expenses, or you can use yours — but you cannot both use your accounts for the same expense.

Children you claim as dependents are covered until they age out of your tax return. Adult children who are not dependents are not covered, even if you pay for their medical care. Keep receipts that show the name of the person who received the care, the date, the provider, and the amount paid.

Record-Keeping and IRS Audits

The IRS can audit your HSA withdrawals for up to seven years after you make them. You do not have to submit receipts when you withdraw money, but you must keep them and be able to produce them if audited. A receipt should show the date, the provider's name, the service or item provided, and the amount charged.

If you cannot produce a receipt, the IRS can disallow the withdrawal and assess income tax plus a 20 percent penalty on the amount. If you withdraw money for a non-may be able to access expense on purpose, the IRS may assess additional penalties. Many HSA providers offer online portals where you can upload and store receipts — using one makes audits much easier to handle.

Frequently Asked Questions

Can I use HSA money to pay for my spouse's medical expenses if they do not have an HSA?

Yes. You can use your HSA to pay for any may have access to medical expense of your spouse or dependents, regardless of whether they have their own HSA or health insurance. Keep a receipt showing the date, provider, service, and amount.

Is a prescription required for every over-the-counter medicine?

No. Insulin can be bought over the counter without a prescription and is HSA-may be able to access. Menstrual products are also HSA-may be able to access without a prescription. For all other OTC medicines and supplies, a doctor's prescription is required as of 2020.

What happens if I withdraw HSA money for something that is not may be able to access?

You owe income tax on the amount plus a 20 percent penalty. If you are over 65 or disabled, you owe only the income tax, not the penalty. Keep receipts so you can prove what the money was spent on if audited.

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

Not usually. You cannot pay your regular monthly or annual premium. You can pay COBRA premiums, long-term care insurance premiums, or health insurance premiums while you are unemployed and receiving unemployment benefits.

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

No, as long as the withdrawals are for may have access to medical expenses. If you withdraw money for non-may have access to expenses, you report that on Form 8889 when you file your taxes.