Can you spend HSA money on anything? This is a common question among individuals who have a Health Savings Account (HSA). While HSAs offer numerous tax advantages and flexibility, there are specific rules and limitations on how the funds can be used. In this article, we will explore the various permissible and restricted expenses using HSA money.
HSAs are designed to help individuals save for qualified medical expenses, which include costs not covered by insurance. The funds in an HSA grow tax-deferred and can be withdrawn tax-free for qualified medical expenses. However, it’s important to understand the criteria for qualifying expenses to avoid potential penalties and tax consequences.
Permitted HSA Expenses
1. Prescription Medications: You can use HSA funds to pay for prescription medications, including insulin and other qualifying drugs.
2. Over-the-Counter (OTC) Medications: HSA funds can be used for OTC medications, provided they are prescribed by a doctor. Keep in mind that many OTC medications are not eligible without a prescription.
3. Medical Equipment: Items such as crutches, wheelchairs, and blood sugar monitors are considered qualified medical expenses and can be purchased with HSA funds.
4. Dental and Vision Care: HSA funds can be used for dental and vision care expenses, including exams, cleanings, glasses, and contacts.
5. Health Insurance Premiums: Contributions to high-deductible health plans (HDHPs) are eligible for HSA funding. However, premiums for individual health insurance plans are not.
6. Health and Fitness Expenses: Expenses for gym memberships, fitness classes, and other health and fitness-related costs may be eligible if they are deemed medical expenses by a doctor.
7. Long-Term Care Insurance: Premiums for long-term care insurance policies can be paid for with HSA funds.
8. Health Savings Account and HSA-compatible Debit Cards: You can use HSA funds to pay for fees associated with opening and maintaining an HSA account, as well as for HSA-compatible debit cards.
Restricted HSA Expenses
1. Non-Qualified Medical Expenses: Withdrawals from an HSA for non-qualified medical expenses are subject to income tax and a 20% penalty. Examples include cosmetic surgery, hearing aids, and most over-the-counter medications without a prescription.
2. Personal Care Items: Expenses such as haircuts, nail services, and vitamins are generally not considered qualified medical expenses.
3. Health Insurance Premiums (except HDHPs): As mentioned earlier, HSA funds cannot be used to pay for premiums for individual health insurance plans.
4. General Living Expenses: HSA funds cannot be used for general living expenses, such as groceries, rent, or mortgage payments.
5. Taxes: While you can contribute to an HSA after you file your taxes, you cannot use HSA funds to pay for your income tax.
Understanding the rules and limitations of using HSA funds is crucial for maximizing the benefits of this tax-advantaged account. By adhering to the guidelines for qualified medical expenses, you can ensure that your HSA money is used effectively and avoid unnecessary taxes and penalties.
