HSA Qualified Expenses
Spend Your Tax-Free Dollars Wisely
If you have taken the first step and started contributing tax-free money to your health savings account to save for future medical expenses, you’re likely wondering – what next?
In order for your funds to remain tax-free, you have to spend them according to the IRS tax code. This means you should only use HSA funds for qualified medical expenses.
In addition to being able to withdraw your money tax free to cover these types of expenses (which might otherwise be covered by a traditional low-deductible high-premium policy), you can use your HSA health plans account to cover other costs that would not normally be covered by a health insurance policy.
Dental expenses. Individuals can typically only purchase dental discount plans, or fairly expensive dental policies with a limited choice of dentists. Coverage for braces is normally very limited. However, any of these medically necessary procedures can be paid for from your HSA account.
Charges incurred as part of a preventive health program. This could include vaccines, blood tests, metabolism tests, and other lab tests, and even fees paid to a health institute or vitamins if prescribed by a doctor.
Special fees incurred by handicapped individuals, including wheelchairs, telephone or TV equipment to assist the hard-of-hearing, the cost and care of guide dogs, or special school costs for the handicapped.
Alternative treatments. This could include acupuncture, Ayurvedic Medicine, aromatherapy, homeopathy, Traditional Chinese Medicine (TCM), nutritional consulting, or even healing services provided by a Christian Science Practitioner or other type healer.
Transportation and lodging expenses, when related to health care
Mental therapy. This includes the charges of psychiatrists, psychologists, psychoanalysts, and psychotherapists
Physical therapy. This could include hydrotherapy, chiropractor services, or medical massage therapy
Maternity expenses that are not covered by your health insurance policy.
Also note that your HSA health plans account can be used to pay these expenses for any spouse or dependent member of the family including same sex and domestic partners, even if they are not covered under the insurance policy.
View Entire List of HSA Qualified Expenses
HSA Qualified Expenses List
|Acupuncture||Limbs – artificial|
|Alcoholism – treatment||Lodging (treatment related, and with restrictions, up to $50 per person)|
|Ambulance – hire||Long-Term Care|
|Autoette or Wheelchair||Mattress – prescribed for alleviation of arthritis|
|Birth Control Pills||Medical conference fees (relating to chronic illness; no lodging or meals)|
|Blind Persons Services||Medicare Parts A and B|
|Braces||Membership Fees – association furnishing medical services, hospitalization, and clinical care|
|Capital Expenditures – home modifications for handicapped – primary purpose must be medical care||Nursing Home – medical reasons|
|Car Equipment – to accommodate wheelchair and/or handicapped controls||Nursing Services – board and Social Security paid by taxpayers|
|Childbirth Preparation Classes – mother||Nutritional Supplements (by prescription)|
|Christian Science Treatment||Operations – legal|
|Contact Lenses – replacement insurance||Optometrists|
|Deaf Persons – hearing aid and batteries, hearing aid animal and care, lip reading expenses, special education, modified telephone||Orthopedic Shoes – excess costs|
|Dental Fees – see Dental Plans||Oxygen / Oxygen Equipment|
|Diagnostic Fees||Psychiatric Care|
|Diapers (adult disposable) – used due to severe neurological disease||Psychologists|
|Domestic Aid – rendered by a nurse||Reclining Chair – for cardiac patients|
|Drug Addiction Recovery||Remedial Reading|
|Drugs – prescription or over-the-counter||Retirement Home lifetime medical care|
|Dyslexia Language Training||Sanitarium Rest Home – medical, educational, rehabilitative services|
|Elevator for Alleviation of Cardiac Condition||Schools – special, relief, or handicapped|
|Eyeglasses and Examination Fees||Sexual Dysfunction Treatment|
|Fluoride Device – on advice of a dentist||Sterilization|
|Halfway House – adjustment to mental hospital||Surgical Fees|
|Healing Services Fees||Swimming Pool – treatment of polio or arthritis|
|Health Maintenance Organizations||Teeth – artificial|
|Hearing Aids||Television – closed-caption decoder|
|Hospital Care||Therapy Treatments – prescribed by a physician|
|Insulin||Transportation – essentially and primarily for medical care|
|Laboratory Fees – lab discounts||Weight Loss Programs – as a treatment for the disease of obesity|
|Laetrile – by prescription||Wheelchair or Autoette|
|Lazer eye surgery||X-rays|
|Lead Paint Removal||Mileage|
|Legal Expenses – authorizing treatment of mental illness||Stop smoking programs|
|Lifetime Medical Care – prepaid; retirement home||Vasectomy|
Are There Penalties for Non-qualified HSA Expenses?
It can be tempting to withdraw funds from your HSA for purposes other than qualified expenses. If you take this route, be prepared for a large tax bill. All funds withdrawn for non-qualifying expenses before the age of 65 are subject to a 20% tax penalty.
Once you turn 65, you may withdraw funds for any reason. Funds used for qualified medical expenses remain tax-free. Funds use for any other reason are taxed as retirement income.
View Entire List of Non-Qualified HSA Expenses
Non-Qualified HSA Expenses List
|Advance payment for services to be rendered next year||Illegally produced drugs|
|Athletic club membership||Maternity clothes|
|Automobile insurance premium allocable to medical coverage||Premiums for health insurance, other than COBRA|
|Boarding school fees||Scientology counseling|
|Commuting expenses of a disabled person||Special foods or beverages|
|Cosmetic surgery and procedures||Specially designed car for the handicapped other than an autonette or special equipment|
|Cosmetics, hygiene products and similar items||Travel for general health improvement|
|Health programs offered by resort hotels, health clubs, and gyms||Tuition and travel expenses for a problem child to a particular school|
|Illegal operations and treatments||Weight loss programs (unless it is a treatment for a specific disease, such as obesity or cardiovascular disease, diagnosed by your physician)|
Am I Required to Use My HSA Funds by a Certain Time?
No – there is nothing on the books that requires you to use the money in your HSA at all. Any money left in your HSA at the end of the year continues to roll over and continue earning interest. If you choose to pay out of pocket for medical expenses without making a withdrawal from your HSA, that is perfectly fine. Your money will continue to grow tax-free.
You can reimburse yourself at any time for qualified expenses. Some prefer to do this once a year while others prefer to do this after each incurred expense. You can choose not to use your HSA at all, which makes for a nice retirement fund in the future.
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