Health Savings Accounts: Eligible Expenses
A Health Savings Account (HSA) is a powerful tool for managing healthcare costs, but knowing which expenses are eligible is key to maximizing your tax savings and avoiding penalties. This article breaks down what counts as an eligible expense, how to use your HSA funds, and tips to stay compliant with IRS rules.
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When you contribute to a Health Savings Account, your money grows tax-free and can be withdrawn tax-free—as long as you use it for qualified medical expenses. The IRS defines eligible expenses broadly, but not everything related to health or wellness qualifies. Using HSA funds for non-eligible expenses before age 65 results in taxes plus a 20% penalty, so it’s important to know what’s covered.
What Are Eligible HSA Expenses?
Eligible expenses for HSAs are generally those that would qualify for the medical and dental expense deduction on your federal tax return. These include:
- Doctor visits and hospital services: Payments for medical care provided by licensed professionals, including primary care, specialists, and hospital stays.
- Prescription medications: Most prescribed drugs are eligible, but over-the-counter medications require a prescription unless they are insulin.
- Dental and vision care: Cleanings, fillings, eye exams, glasses, and contact lenses all qualify.
- Mental health services: Therapy, counseling, and psychiatric care are covered.
- Medical equipment and supplies: Items like crutches, blood sugar monitors, and bandages are eligible.
- Preventive care: Screenings, immunizations, and annual physicals.
- Long-term care services: Some long-term care insurance premiums and services may qualify.
Common Eligible HSA Expenses
| Category | Examples |
|---|---|
| Medical Services | Office visits, surgeries, X-rays |
| Prescription Drugs | Insulin, antibiotics, birth control |
| Dental Care | Exams, cleanings, braces, dentures |
| Vision Care | Eye exams, glasses, contact lenses, LASIK |
| Mental Health | Therapy, substance abuse treatment |
| Medical Supplies | Bandages, test strips, CPAP machines |
| Preventive Care | Vaccines, cancer screenings, mammograms |
| Other | Hearing aids, acupuncture, chiropractic care |
What’s Not Eligible?
Not every health-related purchase is HSA-eligible. Common non-eligible expenses include:
- Cosmetic procedures (e.g., teeth whitening, plastic surgery not medically necessary)
- Gym memberships and general wellness programs
- Over-the-counter medications (unless prescribed)
- Vitamins and supplements (unless prescribed for a specific condition)
- Non-prescription sunglasses
How to Pay for Eligible Expenses
- Use your HSA debit card at the point of sale for qualified expenses.
- Reimburse yourself for eligible expenses paid out-of-pocket by transferring funds from your HSA to your personal account.
- Keep receipts and documentation for all HSA purchases in case of an IRS audit.
Tips for HSA Compliance
- Always check the IRS’s latest list of eligible expenses (Publication 502).
- Save all receipts and records for at least three years.
- If you mistakenly use HSA funds for a non-eligible expense, you can correct it by returning the funds to your HSA before the tax filing deadline.
Frequently Asked Questions
Q: Can I use my HSA to pay for my spouse’s or children’s medical expenses?
A: Yes, as long as they are claimed as dependents on your tax return.
Q: Are over-the-counter medications eligible?
A: Only if prescribed by a doctor, except for insulin, which is always eligible.
Q: What happens if I use my HSA for a non-eligible expense?
A: You’ll owe income tax on the amount and a 20% penalty if you’re under age 65.
Q: Are dental and vision expenses covered?
A: Yes, most dental and vision care costs are eligible HSA expenses.
Q: Where can I find the full list of eligible expenses?
A: The IRS publishes a comprehensive list in Publication 502, updated annually.
