What an HSA Pays For

An HSA covers medical, dental, and vision expenses that you would otherwise pay out of pocket. The IRS publishes a list of may have access to medical expenses, and if an expense is on that list, you can withdraw HSA money tax-free to pay for it. If it is not on the list, you can still withdraw the money, but you will owe income tax plus a 20% penalty on the withdrawal amount.

The key rule: the expense must be for diagnosis, treatment, or prevention of a disease or condition. Routine care, preventive screenings, and prescription medications all count. Cosmetic procedures, vitamins you take for general wellness, and gym memberships do not.

You do not have to use your HSA money in the year you earn it. Unlike a flexible spending account (FSA), HSA funds roll over indefinitely. You can let the money sit and grow, then withdraw it years later for a medical expense. This makes an HSA different from an FSA, which typically has a "use it or lose it" rule.

Key Takeaways

  • HSA funds cover doctor visits, hospital stays, prescription drugs, dental work, and vision care if those services treat or prevent a medical condition.
  • Cosmetic procedures, over-the-counter vitamins for general health, and fitness memberships are not covered, even though you can withdraw HSA money to pay for them (with tax and penalty).
  • You can use HSA money years after you earn it, unlike FSA funds, which expire at the end of the plan year.
  • The IRS maintains the official list of may have access to expenses; if you are unsure whether something counts, you can check the Publication 502 list or ask your HSA provider.

Common Covered Expenses

Doctor visits and hospital care are covered, including emergency room visits, surgery, and inpatient stays. Prescription medications are covered. Over-the-counter drugs like ibuprofen or cold medicine are covered only if you have a prescription for them (this rule changed in 2020).

Dental work is covered: fillings, root canals, cleanings, extractions, and orthodontia all count. Vision care is covered: eye exams, glasses, contact lenses, and laser eye surgery. Hearing aids and hearing tests are covered. Mental health treatment, including therapy and psychiatric medication, is covered.

Preventive care is covered: annual physicals, cancer screenings, vaccinations, and cholesterol tests. Durable medical equipment is covered: wheelchairs, crutches, blood pressure monitors, and glucose meters. Insulin and other diabetes supplies are covered. Fertility treatment, including IVF and related medications, is covered.

What Is Not Covered

Cosmetic procedures are not covered unless they treat an injury or deformity caused by disease. Botox, teeth whitening, and hair removal are not covered. Routine haircuts and personal grooming are not covered.

General wellness expenses are not covered: gym memberships, fitness classes, and vitamins taken for overall health do not count. However, if a doctor prescribes a specific supplement to treat a diagnosed condition, that may be covered.

Insurance premiums themselves are not covered with HSA funds, with narrow exceptions: you can use HSA money to pay premiums if you are receiving unemployment benefits, or to pay long-term care insurance premiums (up to certain limits), or to pay Medicare premiums after age 65. You cannot use HSA funds to pay your regular health insurance premium while you are working.

Expenses for a spouse or dependent who is not claimed on your tax return are not covered. If you are married but file taxes separately, your spouse cannot use your HSA. If you have an adult child who is not your dependent, their medical expenses do not count.

How to Know If Something Is Covered

The IRS publishes Publication 502, which lists hundreds of may have access to medical expenses. Your HSA provider (the bank or financial company managing your account) usually has a searchable database on their website. You can search by expense type—"dental implant" or "acupuncture"—and see whether it is covered.

If you are unsure, ask your HSA provider before you withdraw the money. Some expenses fall into gray areas. Acupuncture, for example, is covered if a licensed practitioner treats you for a specific medical condition, but not if you use it for general wellness. Chiropractic care is covered if it treats a medical condition, but not for routine adjustments.

Keep receipts and documentation for every HSA withdrawal. The IRS does not require you to submit proof when you withdraw, but if you are audited, you need to show that the expense was may have access to. A receipt from the provider, an explanation of benefits from your insurance, or a medical bill with a diagnosis code all work as proof.

HSA Withdrawals and Taxes

If you withdraw HSA money for a may have access to medical expense, the withdrawal is tax-free. You do not report it on your tax return, and you do not owe income tax or the 20% penalty.

If you withdraw HSA money for something that is not a may have access to expense, you owe income tax on the amount withdrawn, plus a 20% penalty. For example, if you withdraw $500 for a cosmetic procedure and you are in the 22% tax bracket, you would owe $110 in income tax plus $100 in penalty, for a total of $210 in taxes on a $500 withdrawal. That means the cosmetic procedure actually cost you $710.

After age 65, the penalty goes away. You can withdraw HSA money for any reason without the 20% penalty, though you still owe income tax on non-may have access to withdrawals. This makes an HSA function like a traditional retirement account after 65.

Keeping Track of What You Spend

Your HSA provider sends you statements showing deposits and withdrawals, but they do not track whether each withdrawal was for a may have access to expense. That is your responsibility. Keep a record of what you withdrew the money for and what the expense was.

Many people use a spreadsheet or a note in their phone to track HSA withdrawals. Write down the date, the amount, the provider (doctor, pharmacy, dentist), and what the expense was. If you are audited years later, this record helps you prove the withdrawal was may have access to.

Some HSA providers offer a debit card linked to your account. When you use the card at a pharmacy or doctor's office, the provider may automatically categorize the transaction as a may have access to expense. This is helpful, but it is not foolproof—the provider's categorization is not binding on the IRS, so keep your own records anyway.

Frequently Asked Questions

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

Yes, if your spouse is your dependent for tax purposes. You can use your HSA to pay for medical expenses for your spouse and any children or other dependents you claim on your tax return. The expense does not have to be for you personally.

Are over-the-counter pain relievers covered?

Only if you have a prescription for them. Ibuprofen, acetaminophen, and other OTC drugs are covered if a doctor writes a prescription, but not if you buy them without a prescription. Prescription-strength versions are always covered.

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

Not while you are working and enrolled in your employer's plan. You can use HSA funds to pay Medicare premiums after age 65, or to pay long-term care insurance premiums up to certain limits, or to pay premiums if you are receiving unemployment benefits. Otherwise, premiums are not a may have access to expense.

What happens if I withdraw money for something that turns out not to be covered?

You owe income tax plus a 20% penalty on that withdrawal. If you realize the mistake before filing your taxes, contact your HSA provider to see if you can return the funds. Some providers allow redeposits within a certain window, which would reverse the tax consequences.

Can I use my HSA for my adult child's medical expenses?

Only if you claim them as a dependent on your tax return. If your adult child is independent and files their own taxes, their medical expenses do not count as may have access to expenses for your HSA, even if you pay for them out of pocket.