Can I Use My HSA for Gas and Medical Transportation?

Health Savings Accounts (HSAs) offer a tax-advantaged way to save and pay for qualified medical expenses. These accounts are paired with high-deductible health plans (HDHPs), allowing individuals to contribute pre-tax dollars, which can then grow tax-free and be withdrawn tax-free for eligible healthcare costs.

Defining Qualified Medical Expenses

The Internal Revenue Service (IRS) defines “qualified medical expenses” for HSA purposes as those primarily for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any part or function of the body. Common examples include fees for doctors, dentists, and other medical practitioners, as well as the costs of prescription medications, dental care, and vision care. It is important that the expense is incurred after the HSA was established. Qualified medical expenses also encompass certain equipment, supplies, and diagnostic devices necessary for medical care. The IRS clarifies that expenses merely beneficial to general health, such as vitamins or a vacation, do not qualify.

Transportation Expenses and Your HSA

Transportation expenses directly related to receiving medical care, such as travel to and from medical appointments, hospital visits, or medical conferences, can be eligible for HSA use. The IRS sets a standard mileage rate for medical transportation, which is 21 cents per mile for 2025. This rate covers the operating expenses of using a car for medical reasons. Additionally, costs for ambulance services are qualified medical expenses. Other eligible transportation costs can include taxi fares, bus fares, or train tickets for medical travel, and even admission and transportation for medical conferences related to a chronic illness.

Managing HSA Funds and Record Keeping

HSA funds can typically be accessed using a debit card provided by the HSA administrator or through reimbursement for out-of-pocket payments. Maintain meticulous records for all HSA-funded expenses. This includes keeping receipts, Explanation of Benefits (EOB) statements from your health plan, and any other supporting documentation like doctor’s notes. These records are important for tax purposes and can be requested in the event of an IRS audit. While you do not typically send these records with your tax return, you must be able to produce them to demonstrate that distributions were exclusively for qualified medical expenses and were not reimbursed from other sources.

Consequences of Using Funds for Non-Qualified Expenses

Using HSA funds for expenses not deemed qualified medical expenses by the IRS carries financial penalties. Any amount withdrawn for non-qualified purposes becomes taxable income. This means the distribution will be added to your gross income and taxed at your ordinary income tax rate. In addition to income tax, a 20% penalty tax generally applies to non-qualified distributions if you are under age 65.