What HSA money covers

An HSA covers may have access to medical expenses — the IRS's term for healthcare costs you can pay with HSA funds without owing income tax on that money. The list is long, but it has hard boundaries. You can use HSA money for doctor visits, prescription drugs, dental work, vision care, mental health treatment, and hospital stays. You cannot use it for health insurance premiums (with three exceptions), cosmetic procedures, or over-the-counter drugs unless a doctor prescribes them.

The IRS publishes a full list of what counts as a may have access to medical expense, and it includes things most people do not think of as medical: crutches, hearing aids, acupuncture, fertility treatment, physical therapy, psychiatric care, and even the cost of a guide dog. The rule is roughly this: if it is primarily for diagnosing, treating, or preventing disease or injury, it counts. If it is for general health or wellness, it usually does not.

You can use HSA money to pay for your spouse's and dependents' may have access to medical expenses too, even if they are not on your HSA plan. The money does not have to be used in the same year you contribute it — HSA funds roll over indefinitely, making them different from Flexible Spending Accounts (FSAs), which have a use-it-or-lose-it rule.

Key Takeaways

  • HSA money covers doctor visits, prescriptions, dental, vision, mental health care, and hospital bills, but not health insurance premiums (except Medicare, COBRA, and long-term care insurance).
  • Over-the-counter drugs like cold medicine and pain relievers do not count unless a doctor writes a prescription for them.
  • Cosmetic procedures, gym memberships, and general wellness products do not may have access to, even if they improve your health.
  • You can use HSA funds to pay for your spouse's and dependents' medical expenses, and unused money carries over year to year with no deadline.
  • If you withdraw HSA money for something that does not may have access to, you owe income tax on that amount plus a 20 percent penalty.

Medical expenses that may have access to

may have access to expenses include the obvious ones: doctor office visits, emergency room care, surgery, hospital stays, X-rays, lab tests, and prescription medications. They also include mental health and substance abuse treatment, whether inpatient or outpatient. Dental work counts — fillings, cleanings, root canals, orthodontia, and dentures all may have access to. Vision care counts too: eye exams, glasses, contact lenses, and laser eye surgery.

Less obvious may have access to expenses include medical equipment and supplies: blood pressure monitors, glucose meters, hearing aids, wheelchairs, crutches, bandages, and syringes. Therapy counts: physical therapy, occupational therapy, and speech therapy. Fertility treatment, including in vitro fertilization (IVF), qualifies. Acupuncture, chiropractic care, and osteopathic manipulation count if a licensed practitioner provides them. Long-term care insurance premiums and may have access to long-term care services also may have access to.

Nursing home care qualifies if it is primarily for medical care, not just room and board. The cost of a guide dog or service animal for a person with a disability qualifies. Even the cost of traveling to receive medical care — airfare, hotel, meals — can count if the trip is primarily for medical treatment.

What does not may have access to

Over-the-counter medications do not may have access to unless a doctor writes a prescription for them. This changed in 2020 — before that, you could buy cold medicine, pain relievers, and allergy pills with HSA money without a prescription. Now you cannot, even though the same drug in the same dose is available both ways. If your doctor writes a prescription for ibuprofen or diphenhydramine, it counts. If you buy the identical product off the shelf, it does not.

Cosmetic procedures do not may have access to, even if they have health benefits. Botox, teeth whitening, hair removal, and weight loss surgery (unless medically necessary for a diagnosed condition) are not covered. Gym memberships, fitness classes, and general wellness programs do not count. Vitamins and supplements do not may have access to unless a doctor prescribes them for a specific diagnosed deficiency.

Health insurance premiums do not may have access to — with three exceptions. You can use HSA money to pay premiums for Medicare (Part A, B, D, and supplemental policies), COBRA continuation coverage, and long-term care insurance. You cannot use it for premiums on your regular health plan, a spouse's plan, or a dependent's plan. Copays and deductibles count, but the insurance premium itself does not.

The three exceptions for insurance premiums

If you are retired and over 65, you can use HSA money to pay Medicare premiums without penalty. This includes Part A (hospital insurance), Part B (medical insurance), Part D (prescription drug coverage), and supplemental Medigap policies. You can also use HSA funds to pay for COBRA continuation coverage — the temporary health insurance you can buy if you lose employer coverage through job loss or other may have access to events.

Long-term care insurance is the third exception. You can use HSA money to pay premiums for a policy that covers nursing home care, assisted living, or in-home care for a chronic illness or disability. There is an age-based limit on how much you can pay: the IRS sets a maximum annual premium amount depending on your age, and it ranges from roughly $450 per year at age 40 to over $3,000 per year at age 60 and up. These limits change yearly.

Penalties for non-may have access to withdrawals

If you withdraw HSA money and use it for something that does not may have access to, you owe income tax on that amount plus a 20 percent penalty. The penalty is steep because the IRS treats non-may have access to withdrawals as a breach of the HSA contract. For example, if you withdraw $500 to pay for a cosmetic procedure and you are in the 22 percent tax bracket, you owe $110 in income tax plus $100 in penalty — a total of $210 on a $500 withdrawal.

The exception is after age 65. Once you turn 65, you can withdraw HSA money for any reason without the 20 percent penalty. You still owe income tax on non-may have access to withdrawals, but the penalty goes away. This is one reason HSAs are sometimes called "retirement accounts in disguise" — after 65, they work like traditional IRAs, except the money was never taxed when you contributed it.

Keep receipts for everything you pay with HSA money. The IRS does not require you to submit receipts when you make a withdrawal, but if you are audited, you need proof that the expense was may have access to. Many people keep a file of medical receipts and HSA statements to document their spending.

How to know if something qualifies

The IRS publishes Publication 502, which lists hundreds of may have access to and non-may have access to medical expenses. Your HSA provider — usually a bank or investment company — also publishes a list of common may have access to expenses. If you are unsure about a specific expense, ask your HSA provider before you withdraw the money. Some providers have a customer service line you can call; others have online tools to check whether an expense qualifies.

The general rule is: if it is primarily for treating or preventing a diagnosed medical condition, it probably qualifies. If it is for general health or wellness, it probably does not. Prescription drugs almost always may have access to. Over-the-counter drugs almost never do (unless prescribed). Dental and vision care may have access to. Cosmetic procedures do not. When in doubt, check with your provider or look up the expense in Publication 502 before you spend the money.

Frequently Asked Questions

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

Not for regular health insurance. You can use HSA money for Medicare premiums (if you are 65 or older), COBRA continuation coverage, and long-term care insurance premiums. For any other health plan premium, you cannot use HSA funds without owing income tax and a 20 percent penalty on the withdrawal.

Do over-the-counter pain relievers and cold medicine count?

No, not without a prescription. Since 2020, over-the-counter drugs do not may have access to unless a doctor writes a prescription for them. If your doctor prescribes ibuprofen or allergy medicine, it counts. If you buy the same product off the shelf, it does not.

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

Yes. You can use your HSA to pay for may have access to medical expenses for your spouse and any dependents you claim on your tax return, even if they are not covered by your health plan. The money does not have to be used in the same year you contribute it.

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

You owe income tax on that amount plus a 20 percent penalty. After age 65, the penalty goes away, but you still owe income tax on non-may have access to withdrawals. Keep receipts to prove expenses were may have access to if you are audited.

Does dental work count as a may have access to expense?

Yes. Cleanings, fillings, root canals, extractions, orthodontia, dentures, and other dental procedures all may have access to. Cosmetic dental work like teeth whitening does not may have access to unless it is medically necessary.