You can withdraw money from your HSA, but the rules about what you can spend it on are strict, and withdrawals for non-medical expenses trigger taxes and penalties

A health savings account is not a locked box. You can take money out whenever you want. But the IRS treats HSA withdrawals in two categories: those for may have access to medical expenses, which come out tax-free, and everything else, which gets taxed as income plus hit with a 20% penalty. The difference between the two is the difference between a withdrawal that costs you nothing and one that costs you roughly 32% of what you take out (depending on your tax bracket).

The may have access to medical expenses list is long but specific. It includes deductibles, copays, coinsurance, dental work, vision care, prescription drugs, and medical equipment. It does not include health insurance premiums (with three exceptions: COBRA, Medicare, and long-term care insurance). It does not include cosmetic procedures, gym memberships, or over-the-counter drugs unless you have a prescription. The IRS publishes the full list in Publication 502, and your HSA provider can tell you whether a specific expense qualifies before you withdraw.

Key Takeaways

  • Withdrawals for may have access to medical expenses are tax-free; withdrawals for anything else are taxed as income plus a 20% penalty.
  • may have access to expenses include deductibles, copays, dental, vision, and prescription drugs, but not most health insurance premiums or over-the-counter items without a prescription.
  • You can withdraw money by check, debit card, or reimbursement request, depending on what your HSA provider offers.
  • After age 65, you can withdraw money for any reason without the 20% penalty, though non-medical withdrawals are still taxed as income.
  • You do not have to spend the money in the same year you earn it; HSA funds roll over indefinitely and can be used for past medical expenses you paid out of pocket.

How to actually take money out

The mechanics depend on your HSA provider. Most offer a debit card linked to your account, which you can use at pharmacies, medical offices, or anywhere that accepts cards. Some providers let you request a check mailed to you. Others require you to pay the expense yourself and then submit a reimbursement request with a receipt or invoice.

The debit card is the fastest route if your provider offers it. You swipe it at the doctor's office or pharmacy, and the money moves immediately. Reimbursement requests take longer—usually a few business days to process—but they give you a paper trail and let you keep the receipt as proof the expense was may have access to.

Do not withdraw more than you need. Once money leaves the account, it is gone. If you withdraw for a non-may have access to expense and later realize you made a mistake, you cannot put it back without filing an amended tax return and paying the penalty anyway.

What counts as a may have access to medical expense

The IRS definition is broad enough to cover most things a doctor orders or a pharmacy sells, but narrow enough to exclude things that sound medical but are not. Deductibles, copays, and coinsurance all count. Prescription drugs count. Dental work—fillings, crowns, root canals, orthodontia—counts. Vision care, including glasses, contacts, and eye exams, counts. Medical equipment like crutches, wheelchairs, blood pressure monitors, and glucose meters counts.

Preventive care counts: vaccines, cancer screenings, cholesterol tests. Mental health treatment counts. Physical therapy counts. Acupuncture counts if a doctor prescribes it. Fertility treatment, including IVF, counts. Hearing aids and cochlear implants count.

What does not count: health insurance premiums (except COBRA, Medicare Part A or B or D, and long-term care insurance). Over-the-counter drugs without a prescription—even aspirin or allergy medicine. Cosmetic procedures like Botox or teeth whitening. Gym memberships or fitness classes, even if your doctor recommends exercise. Vitamins and supplements unless prescribed by a doctor for a specific medical condition. Sunscreen. Toothpaste. Shampoo. Maternity clothes. Cosmetic dentistry.

The line between "prescribed" and "recommended" matters. If your doctor writes a prescription for a vitamin because you have a documented deficiency, it counts. If your doctor tells you to take vitamin D because it is good for you, it does not.

Non-medical withdrawals and the 20% penalty

If you withdraw money for something that is not a may have access to medical expense, the IRS taxes it as ordinary income and adds a 20% penalty on top. That means if you withdraw $1,000 for a non-may have access to expense and you are in the 22% tax bracket, you owe $220 in income tax plus $200 in penalty—$420 total, leaving you $580 of the original $1,000.

You report the withdrawal on your tax return using Form 8889. The IRS does not automatically know what you spent the money on; they rely on you to report it honestly. But if you cannot produce a receipt showing the money went to a may have access to expense, and the IRS audits you, you will owe the tax and penalty retroactively, plus interest.

The penalty applies to the amount withdrawn, not to the earnings on that amount. If you have $10,000 in your HSA and $2,000 of that is investment gains, and you withdraw $5,000 for a non-may have access to expense, the penalty is $1,000 (20% of $5,000), not $400 (20% of $2,000).

The age 65 exception

After you turn 65, the 20% penalty goes away. You can withdraw money for any reason without penalty. However, non-medical withdrawals are still taxed as ordinary income. This makes an HSA function like a traditional IRA after 65—a tax-deferred savings account you can raid for anything, but you pay income tax on what you take out.

This rule applies whether or not you are enrolled in Medicare or still working. Once you hit 65, the penalty is gone. Medical withdrawals remain tax-free; everything else is taxed but not penalized.

Using HSA money for past medical expenses

You do not have to spend HSA money in the year you earn it. You can withdraw funds to reimburse yourself for medical expenses you paid out of pocket in any previous year, going back as far as the year you opened the account. This is useful if you had a large medical bill, paid it yourself, and did not have HSA funds available at the time.

Keep the original receipt or invoice. If you reimburse yourself years later, you need proof that the expense was may have access to and when it occurred. The IRS does not set a time limit on how far back you can go, but you need documentation.

This also means you can use current HSA funds to reimburse yourself for expenses from previous years without triggering the non-may have access to withdrawal penalty, as long as the expense itself was may have access to. It is a way to let HSA money grow invested while you pay medical bills out of pocket, then reimburse yourself later.

What happens if you withdraw for a non-may have access to expense by mistake

If you withdraw money thinking an expense is may have access to and later find out it is not, you cannot undo the withdrawal. You will owe income tax and the 20% penalty on that amount when you file your tax return. You cannot put the money back into the HSA to avoid the tax.

The only way to recover is to file an amended return if you made the mistake on your original return, or to claim the expense was actually may have access to if you have documentation that supports it. If you genuinely cannot determine whether something qualifies, contact your HSA provider or a tax professional before you withdraw. It is cheaper to ask first than to pay the penalty later.

Frequently Asked Questions

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

No, with three exceptions: COBRA continuation coverage, Medicare Part A or B or D, and long-term care insurance. Regular health insurance premiums, including those for your employer plan, do not count as may have access to expenses. If you withdraw to pay a regular premium, you owe income tax plus the 20% penalty.

What if I withdraw money and then find out the expense does not count?

You owe income tax and the 20% penalty on that withdrawal. You cannot put the money back. If you made the mistake on your tax return, you can file an amended return, but you still owe the tax and penalty. It is better to verify before you withdraw.

Can I use my HSA debit card at a grocery store to buy over-the-counter medicine?

Only if the item requires a prescription. Over-the-counter drugs like aspirin, allergy medicine, or cold medicine do not count as may have access to expenses unless your doctor prescribes them. Many HSA debit cards are programmed to block non-may have access to purchases at pharmacies, but some are not. Check with your provider about how their card works.

Do I have to report HSA withdrawals to the IRS every year?

Yes. You report them on Form 8889, which you file with your tax return. You report the total amount withdrawn and how much was for may have access to versus non-may have access to expenses. The IRS does not automatically receive this information from your HSA provider, but they can audit you and ask for receipts.

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

Yes, as long as your spouse is your tax dependent or you file taxes jointly. The expense itself must be may have access to; the person receiving the care does not have to be covered by your HSA plan. Keep receipts showing the expense was for your spouse.