What Can You Use a HSA Debit Card For?

A Health Savings Account (HSA) debit card offers a convenient method to access funds within an HSA. Its primary function is to simplify transactions for healthcare-related costs, providing immediate access to funds specifically designated for health expenditures. This specialized debit card allows account holders to directly pay for qualified medical expenses using their tax-advantaged savings.

Understanding Eligible Expenses

The Internal Revenue Service (IRS) defines eligible medical expenses for HSA use. These expenses must primarily be for medical care to alleviate or prevent a physical or mental illness or disability. Common examples include fees paid to doctors, dentists, chiropractors, psychiatrists, and other medical practitioners for diagnosis, treatment, or prevention of disease. Payments for inpatient hospital care and nursing services also qualify.

Prescription medications are eligible, as are insulin and certain over-the-counter (OTC) medicines for which a prescription is obtained. Dental care expenses, such as routine cleanings, fillings, extractions, and orthodontia, are qualified. Vision care, including eye exams, prescription eyeglasses, contact lenses, and laser eye surgery, are eligible. Funds can also cover certain medical equipment, supplies, and diagnostic devices, such as crutches, wheelchairs, and blood sugar test kits.

Mental health services, including therapy and counseling, are eligible medical expenses. Transportation primarily for and essential to medical care, such as mileage to and from doctor’s appointments, can be reimbursed. Certain long-term care services and insurance premiums may also qualify, provided specific IRS criteria are met. Consult IRS Publication 502 for the most current and comprehensive list of eligible expenses.

Using Your HSA Debit Card

An HSA debit card functions much like a standard debit card, enabling direct payment for qualified medical expenses at the point of sale or online. Account holders can swipe the card at pharmacies, clinics, hospitals, or other healthcare providers that accept debit card payments. For online purchases of eligible items, the card details are entered as with any other online transaction.

Maintaining meticulous records, such as receipts and itemized statements, for all purchases made with an HSA debit card is important. The IRS may request substantiation of these expenses to verify their eligibility, even if a merchant’s system automatically identifies an item as qualified. If a transaction is declined, it indicates the merchant’s system could not verify the purchase as an eligible medical expense, or there are insufficient funds. In such cases, the account holder would pay out-of-pocket and can later seek reimbursement from their HSA for the eligible expense.

Avoiding Ineligible Purchases and Ensuring Compliance

Using an HSA debit card for expenses not deemed medically necessary by the IRS can lead to tax implications. General health items, such as vitamins for overall wellness, cosmetic procedures, or health club dues, are not eligible. Expenses reimbursed by other insurance plans or other tax-advantaged accounts do not qualify for HSA payment. Verify an expense’s eligibility before making a purchase with the HSA debit card.

If HSA funds are used for non-qualified expenses, the disbursed amount becomes taxable income in the year it is withdrawn. If the account holder is under age 65, the ineligible distribution is subject to an additional 20% penalty tax. This penalty is assessed on top of the regular income tax due on the non-qualified withdrawal. Understanding and adhering to the IRS guidelines for eligible expenses is important to avoid tax liabilities and penalties.