How Do You Get Cash From an HSA Card?

A Health Savings Account (HSA) is a tax-advantaged savings vehicle designed for healthcare expenses. These accounts are typically paired with a high-deductible health plan (HDHP), allowing individuals to save and pay for qualified medical costs with pre-tax dollars. Many HSAs come with a dedicated debit card, providing a convenient way to access funds for eligible expenditures and enabling direct payment at the point of sale.

Defining Qualified Medical Expenses

Understanding qualified medical expenses is fundamental for HSA utilization. The Internal Revenue Service (IRS) defines these expenses under Section 213 of the Internal Revenue Code. These are amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, and for treatments affecting any part or function of the body. The expense must primarily aim to alleviate a physical or mental defect or illness.

Common examples include doctor visits, prescription medications, dental care, vision services, and eligible over-the-counter items, particularly if prescribed. Conversely, certain expenses are not considered qualified medical expenses. These include cosmetic surgery unless necessary to correct a deformity from a congenital abnormality, injury, or disease. General health supplements or vitamins are also excluded unless prescribed by a physician for a specific medical condition. Maintain detailed records, such as receipts and Explanation of Benefits (EOB) statements, for all medical expenses. This documentation is important for substantiating any HSA withdrawal, especially during an IRS audit.

The Reimbursement Process

Reimbursement is a common way to access HSA funds for expenses already paid out-of-pocket. This allows account holders to repay themselves for qualified medical costs they previously incurred. Reimbursement steps vary by HSA administrator, but generally involve logging into an online portal or mobile application. Users typically navigate to a section for expense claims or reimbursements.

Account holders then input details of the medical expense, including the amount, date of service, and a description. While some administrators may not require immediate documentation submission, retain all receipts, invoices, and EOBs for tax purposes. After submitting the reimbursement request, individuals can select their preferred method for receiving funds. Common options include direct deposit to a linked personal bank account, which typically processes within a few business days, or a mailed check. There is no time limit for requesting reimbursement, provided the medical expense was incurred after the HSA was established.

Implications of Non-Qualified Withdrawals

Using HSA funds for non-qualified medical expenses carries financial consequences. If an account holder withdraws funds for a non-qualified expense while under age 65, the amount is subject to income tax and an additional 20% penalty tax. This penalty discourages using these tax-advantaged funds for non-medical purposes before retirement age.

Once an HSA account holder reaches age 65, the rules for non-qualified withdrawals change. At this age, withdrawals for non-medical expenses are still subject to ordinary income tax, but the additional 20% penalty is waived. At age 65, the HSA can function similarly to a traditional retirement account, though distributions for qualified medical expenses remain tax-free and penalty-free at any age. All HSA contributions and distributions, whether qualified or non-qualified, must be reported to the IRS on Form 8889, filed with the individual’s annual tax return.