What Can I Use My HSA Debit Card For?

A Health Savings Account (HSA) debit card offers a convenient method for accessing funds saved in an HSA. This card simplifies paying for qualified medical expenses directly from your tax-advantaged savings. Understanding its uses ensures compliance with tax regulations and maximizes your HSA benefits.

Eligible Medical Expenses

The Internal Revenue Service (IRS) defines qualified medical expenses as amounts paid primarily for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any structure or function of the body. These expenses cover a broad spectrum of healthcare services and products for yourself, your spouse, or eligible dependents. The expense must not be reimbursed by another source, such as health insurance.

Doctor visits are eligible expenses, encompassing copayments, deductibles, and coinsurance for consultations with general practitioners, specialists, and hospital services. This includes urgent care, emergency room services, laboratory fees, X-rays, CT scans, and MRIs used for diagnostic purposes.

Prescription medications are eligible, covering any prescribed medicine. Thanks to the CARES Act, over-the-counter (OTC) medications no longer require a prescription for HSA payment. Common items include pain relievers (e.g., ibuprofen, aspirin, acetaminophen), cold and flu remedies, allergy medications, antacids, and various first-aid supplies like bandages.

Menstrual care products are eligible for HSA use under the CARES Act. This includes items such as tampons, pads, menstrual cups, and period underwear.

Dental care expenses are eligible, including routine cleanings, X-rays, fillings, braces, extractions, crowns, and dentures. Procedures like root canals, dental implants, and sealants are also eligible, provided they are for medical purposes rather than purely cosmetic enhancements.

Vision care includes eye exams, prescription eyeglasses, contact lenses, and contact lens solutions. Procedures like LASIK eye surgery also qualify.

Mental health services are eligible, covering psychotherapy sessions, counseling, and psychiatric care. This includes medications prescribed by a psychiatrist and inpatient psychiatric care for conditions like anxiety or depression. Substance abuse treatment programs and certain alternative therapies, such as acupuncture, also qualify.

Medical equipment and supplies are eligible, including items like crutches, wheelchairs, and CPAP machines for sleep apnea. Diagnostic products such as blood pressure monitors and thermometers, along with personal protective equipment (PPE) like masks and hand sanitizer, are covered. Durable medical equipment, defined as long-lasting items for medical reasons, also qualifies.

Preventive care services are eligible, encompassing vaccinations, annual physical exams, and various health screenings such as mammograms and colonoscopies. These services help maintain overall health and prevent future conditions.

Family planning expenses are covered, including birth control pills, fertility treatments, pregnancy tests, and procedures like vasectomies. When travel is necessary for medical care, HSA funds can be used for associated transportation, lodging, and meal expenses under specific conditions.

Certain insurance premiums can be paid with HSA funds. This includes premiums for COBRA continuation coverage, qualified long-term care insurance, and, for individuals aged 65 and older, premiums for Medicare Parts A, B, D, or Medicare Advantage plans.

Understanding Ineligible Expenses

While an HSA debit card provides broad coverage for healthcare costs, certain expenses are not considered qualified medical expenses by the IRS and cannot be paid for with HSA funds.

Cosmetic procedures are ineligible unless medically necessary to correct a deformity resulting from a congenital abnormality, personal injury, or disfiguring disease. Procedures solely intended to improve appearance, such as teeth whitening, elective plastic surgery, Botox for aesthetic purposes, hair transplants, or liposuction, cannot be paid for with HSA funds.

General health items and services are excluded. This encompasses products like vitamins or dietary supplements taken for general health purposes, unless a medical professional prescribes them to treat a specific condition. Gym memberships are ineligible unless prescribed by a physician for a particular medical condition.

Common toiletries, such as toothpaste, toothbrushes, dental floss, and mouthwash, are not eligible expenses. Similarly, non-prescription skincare products used for general aesthetic concerns like wrinkles or dark spots are not covered.

Using an HSA debit card for ineligible expenses carries financial consequences. Any such withdrawals are subject to federal income tax, meaning the amount withdrawn will be added to your gross income for the year. If the account holder is under age 65, these withdrawals incur an extra 20% penalty tax on the amount distributed.

For example, if an individual under 65 withdraws $500 for an ineligible expense, they would owe income tax on that $500, plus an additional $100 (20% of $500) as a penalty.

The penalty is waived if the account holder is age 65 or older, or due to disability or death, but the withdrawal remains subject to ordinary income tax.

The IRS provides leniency for mistakes; if an account holder can provide evidence that an ineligible expense was made unintentionally, they can return the funds to the HSA to avoid the penalty. It is the account holder’s responsibility to understand and adhere to these regulations to prevent penalties.

Essential Record Keeping

Maintaining detailed records for all Health Savings Account (HSA) debit card transactions is important for tax compliance. These records serve as substantiation that funds were used for qualified medical expenses, a requirement in case of an IRS audit. The responsibility for proving an expense’s eligibility rests entirely with the account holder.

Documentation to retain includes original receipts that clearly show the date of service, the provider, the service or item purchased, and the amount paid. For services covered by insurance, Explanation of Benefits (EOBs) statements from your insurance provider are also important, as they detail what was covered and your out-of-pocket responsibility.

If an expense requires a medical necessity letter or a doctor’s prescription to qualify, such as certain alternative therapies or specific durable medical equipment, these documents must also be kept with your records. This provides proof of eligibility if your account is reviewed. Organizing these records, perhaps by year, can simplify the verification process.

These records are not typically submitted with your annual tax return, but they must be readily available if the IRS requests them. Proper record-keeping helps demonstrate that all distributions from your HSA were for qualified medical expenses, preserving the tax-free status of your withdrawals and avoiding potential penalties.