What qualifies as an eligible HSA expense?

I was recently shopping for a sauna and was surprised to see a note from several sellers saying “your purchases may be HSA eligible” which got me thinking. What other purchases might be appropriate?

What is an HSA?

A health savings account allows you to save money for various health care expenses. Contribute money to an HSA on a pre-tax basis (you won’t owe income taxes on your contributions each year). From there, you can use your HSA funds to pay for (or reimburse yourself for) health care expenses. While your HSA funds can be used at any time, you can only contribute to a health savings account when you have an HSA-eligible health care plan, called a High Deductible Health Plan (HDHP).

If you don’t use your HSA funds, you can earn interest on the balance or even invest your HSA balance. Your interest or investment earnings will be tax-free if you end up using the fund for qualified medical expenses.

What are HSA-eligible expenses?

A wide variety of things could be considered an eligible expense for HSA reimbursement. Some are obvious, like medical fees, dental cleanings, prescriptions, daycare or au pair services. Others are less obvious, such as over-the-counter medications or even sleep aids. Surprisingly, you cannot pay health insurance premiums with HSA funds. The exception to this is that Medicare premiums are eligible for HSA reimbursement.

Related: How to Avoid Health Care Expenses That Ruin Your Retirement

What are health savings accounts typically used for?

For many people, it’s easy to spend your HSA balance as you incur routine medical, dental, or vision expenses. Think about your dental cleanings, annual physicals and all the exams that come with them, and adjustments to your glasses or contacts.

For those with larger HSA balances, there is an even larger list of reimbursable health care expenses. You may even be able to cover health-related travel expenses. A friend recently traveled from Los Angeles to see a specialist at the Mayo Clinic. He could probably be reimbursed for his medical treatments at the clinic, his flight, hotel, meals and Uber
UBER
.

Why can’t you use HSA funds?

As you can see from the list of HSA-eligible medical expenses below, not everything health-related can be reimbursed from your health savings accounts. I won’t list everything you can’t use your HSA funds for. However, this list will include expenses that will not substantially promote the healthiest functioning of your body or are not specifically related to the prevention or treatment of an illness or disease. Some common examples would include supplements or even weight loss programs that a doctor does not specifically prescribe.

When Should You Use Vs. Save your HSA funds?

If you’re in good financial shape, consider investing your contributions in a long-term HSA. If you leave the funds invested, you can get the benefits of compounding and pay yourself back for ongoing medical expenses at a later date.

Many of mine financial planning Clients treat their HSA as an additional retirement account that they can essentially turn into a tax-free income stream to pay for future (or past) medical expenses. Contribute what you can each year to your HSA (ideally max it out), invest the funds, and create a file on your computer (or in the cloud) to store all of your reimbursed medical receipts in one place. Once you need some money (or retire), pay yourself back for years of medical expenses from accumulated HSA funds.

If you’re drowning in credit card debt, your strategy may differ. It would help if you contributed to an HSA to get one tax deduction. However, you may want to reimburse yourself for medical expenses as they come in. There’s no reason to leave those medical expenses on a credit card with over 20% interest.

ELIGIBILITY LIST OF HSA EXPENSES

As a financial planner, I strive to help you get the most out of your available investment, retirement, and other tax-advantaged accounts like an HSA. Keep reading as we share a long list of medical expenses that your HSA should reimburse.

Rules and regulations may change, so please refer to your program’s specific reimbursement guidelines. How purchases are described or coded could affect whether your HSA will reimburse you. For example, let’s say you pay for a prescription at your pharmacy, but the only proof of purchase is your credit card bill that shows the name of the pharmacy. In this case, you probably don’t have enough evidence to prove your reimbursable expenses. On the other hand, if you have a detailed receipt that shows the name of the prescription or at least says “pharmacy,” you’ll be in better shape.

Common HSA Reimbursable Medical Expenses

A wide variety of medical expenses are reimbursed from your HSA balance. This list includes some of the most common reimbursable health savings account expenses.

• Acupuncture
• Artificial limbs
• Contraception
• Blood sugar test kit for diabetics
• Colonoscopy
• Chiropractor
• Contact lenses and solutions
• COVID-19 test
• Crutches
• Dental visits
• Visits to the doctor’s office and co-payment
• Eligible long-term care premiums
• Glasses
• Feminine hygiene products
• Fertility enhancement (including IVF)
• Influenza vaccinations
• Guide dogs
• Hearing Aids
• Infertility treatment
• Insulin
• Workshop fees
• Long-term care services
• Medical alert bracelet
• Medical records charges
• Orthodontics
• Orthotic inserts
• Medicines and non-prescription drugs (see more information below)
• Personal protective equipment (PPE) such as masks and hand sanitizer
• Physical therapy
• Recipes
• Psychiatric care
• Psychologist
• Rehab
• Special education expenses including tutoring for a child with learning difficulties caused by mental disabilities (recommended by a doctor)
• Speech therapy
• Smoking cessation programs (including nicotine gum or patches, if prescribed)
• Surgery
• Vaccines
• Vasectomy
• Vision test
• Walker, cane
• wheelchair

HSA reimbursable non-prescription drugs

Many medical conditions can be treated with over-the-counter medications. Here are some items your HSA should reimburse you without needing a prescription.

• Acid monitors
• Acne medicine
• Allergy drug
• Antidiarrheal drug
• Cold and flu medicine
• Eye drops
• Women’s products
• Treatment of hemorrhoids
• Stool laxatives or softeners
• Medicines for motion sickness
• Nasal sprays
• Ointments for cuts, burns or rashes
• Pain relievers, such as aspirin or ibuprofen
• Trick medicine
• Sleep aids

Services that may be eligible with a completed letter of medical necessity

The list of medical expenses that can be reimbursed by an HSA becomes longer if you have a completed letter of medical necessity from a doctor.

• Weight loss programs – This will only be reimbursed if it is intended to treat a specific disease.
• Compression wear – Consider anti-embolism stockings or tubing. It is usually worn when flying long distances.
• CPR training
• Special Home Modification – Especially for a person with a physical disability.

Can you use your HSA for spousal or dependent medical expenses?

Yes, you can pay for qualified medical expenses for your spouse or dependent from your HSA.

2024 HSA Contribution Limits

The HSA contribution limits for 2024 are $4,150 for individuals and $8,300 for family coverage. People age 55 and older can contribute $1,000.

If you were to contribute $8,300 a year for 20 years (assuming a 10% return on investments), you could have about $475,000 to pay for medical expenses. Remember, this can be for medical expenses you have already incurred or expect to incur.

Related: Are You On Track for the Retirement You Want?