You can spend HSA money on medical expenses you pay out of pocket, but the IRS has a specific list of what counts

An HSA is a savings account, not a credit card — the money sits there until you decide to withdraw it for a may have access to medical expense. The IRS publishes a list of what qualifies, and it is longer than most people think. It includes obvious things like copays and deductibles, but also dental work, vision care, prescription drugs, and some over-the-counter items. The catch is that non-may have access to withdrawals are taxed as income plus hit with a 20% penalty, so knowing the rules before you spend matters.

You can withdraw money at any time for any reason, but only certain expenses avoid the tax and penalty. The IRS updates the list occasionally, and some items move on and off it — which is why checking before you buy is safer than assuming.

Key Takeaways

  • may have access to medical expenses include copays, deductibles, prescription drugs, dental work, vision care, and some over-the-counter items like bandages and pain relievers.
  • Non-may have access to withdrawals are taxed as ordinary income plus charged a 20% penalty, so you lose money if you spend on ineligible items.
  • You can use your HSA debit card at the pharmacy or doctor's office, or pay out of pocket and reimburse yourself later from the account.
  • The IRS publishes Publication 969, which lists hundreds of may have access to expenses and is the source to check when you are unsure.
  • Once you turn 65, you can withdraw money for any reason without the 20% penalty, though non-medical withdrawals are still taxed as income.

Expenses that may have access to without penalty or tax

Copays, coinsurance, and deductibles all count as may have access to expenses. So do prescription medications, insulin, and most over-the-counter drugs if you have a prescription for them. Aspirin, antacids, and cold medicine do not need a prescription to may have access to — they count on their own.

Dental and vision care are fully covered: cleanings, fillings, root canals, eyeglasses, contact lenses, and eye exams. Hearing aids and batteries may have access to. Mental health treatment, including therapy and psychiatric medication, counts. Physical therapy, chiropractic care, and acupuncture are on the list. Hospital stays, surgery, X-rays, lab tests, and imaging like MRI or ultrasound all may have access to.

Some items surprise people: bandages, crutches, wheelchairs, and other medical equipment count. Pregnancy tests and contraception may have access to. Insulin pumps and continuous glucose monitors are covered. If you are unsure whether a specific item or service qualifies, the IRS publishes Publication 969 online, which lists hundreds of expenses with examples.

Items that do not may have access to, even if they seem medical

Cosmetic procedures do not may have access to, even if they are performed by a doctor. Teeth whitening, Botox, and elective plastic surgery are out. General health items like vitamins, supplements, and protein powders do not count unless a doctor prescribes them for a specific medical condition — and even then, the prescription must be in writing.

Gym memberships and exercise equipment do not may have access to, nor do weight loss programs or diet foods. Sunscreen and sunburn relief do not count. Toiletries like toothpaste, shampoo, and deodorant are not covered. Over-the-counter items that are not drugs or medical supplies — like tissues, hand sanitizer, or face masks — are generally not may have access to, though this has shifted during public health emergencies.

Marijuana, even if legal in your state, is not a may have access to HSA expense under federal law. Fertility treatments and surrogacy are not covered. Long-term care insurance premiums do not may have access to, though some long-term care services do.

How to pay and track your spending

Most HSAs issue a debit card that you can use directly at the pharmacy, doctor's office, or hospital. The card is linked to your account, and the withdrawal is automatic. Keep the receipt — your HSA provider may ask for proof that the expense was may have access to, especially if the merchant category code is ambiguous.

You can also pay out of pocket with your own money and reimburse yourself from the HSA later. This is actually a smart strategy if you want to let the money grow: pay medical bills with cash or a credit card, keep the receipts, and withdraw from the HSA months or years later when you need the money. The expense does not have to be reimbursed in the same year it occurred — you can reimburse yourself for medical expenses from years ago, as long as you have the receipts and the expense was incurred after the HSA was opened.

Your HSA provider sends you an annual statement showing all withdrawals. Keep your own records of receipts and what each withdrawal was for, in case the IRS ever asks. If you cannot prove a withdrawal was for a may have access to expense, it will be treated as non-may have access to and taxed plus penalized.

What happens if you spend on something that does not may have access to

A non-may have access to withdrawal is added to your taxable income for that year. If you withdraw $500 for something that does not may have access to and you are in the 22% tax bracket, you owe $110 in federal income tax on that $500. You also owe a 20% penalty, which is another $100. So that $500 withdrawal actually costs you $610 in taxes and penalties.

The penalty does not apply after you turn 65. At that point, non-may have access to withdrawals are still taxed as income, but the 20% penalty goes away. This is one reason HSAs are sometimes called "retirement accounts in disguise" — after 65, they work like a traditional IRA, except the money you do spend on medical expenses comes out tax-free.

If you made a mistake and spent on something you later realized was not may have access to, you cannot undo the withdrawal. You will owe the tax and penalty when you file your return. Some people try to hide non-may have access to spending, but the IRS can audit your HSA records and receipts, and penalties for underreporting are steep.

Spending strategies that save you money

One approach is to use the HSA as a true savings account: pay medical expenses out of pocket when you can afford it, and leave the HSA money invested and growing. Reimburse yourself years later. This works because there is no time limit on reimbursement — an expense from 2020 can be reimbursed in 2025 if you have the receipt.

Another strategy is to front-load your HSA at the start of the year if you know you will have medical expenses. If you are having surgery or starting a new medication, contribute the maximum allowed and use it for those expenses. The money you contribute reduces your taxable income, so you save on taxes immediately.

If you have a choice between using your HSA and using insurance to cover an expense, do the math. If your insurance has a copay of $30 and you can withdraw $30 from your HSA tax-free, they are equivalent. But if you can pay the $30 out of pocket and leave the HSA money to grow, you come out ahead in the long run.

Frequently Asked Questions

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

No, regular health insurance premiums do not may have access to. However, you can use HSA money to pay premiums for COBRA coverage, long-term care insurance, and health insurance while you are receiving unemployment benefits. Medicare premiums also may have access to once you turn 65.

What if I lose my receipt for a medical expense?

Without a receipt, you cannot prove the withdrawal was may have access to. If the IRS audits your HSA, you will owe tax and penalty on that amount. Keep receipts for at least three years, or longer if you plan to reimburse yourself years later. A credit card or bank statement showing a charge to a doctor or pharmacy helps, but the actual itemized receipt is stronger proof.

Can I spend HSA money on my spouse or children?

Yes, if they are your dependents. You can pay for their medical expenses and reimburse yourself from your HSA. If they are not your dependents, you cannot use your HSA for their expenses — the money must be for your own may have access to medical costs.

Do I have to spend my HSA money every year or do I lose it?

No, HSA money rolls over year to year. There is no "use it or lose it" rule like some flexible spending accounts have. The money stays in the account indefinitely, and you can withdraw it whenever you have a may have access to expense, even decades later.

What counts as a prescription for over-the-counter drugs?

A written or electronic prescription from a doctor. A verbal recommendation does not count. If you want to use HSA money for over-the-counter pain relievers or allergy medication, ask your doctor to write a prescription for it. Some doctors will, some will not — it depends on their practice.