Where Can You Use a HSA Card and For What?

An HSA card is a specialized payment method connected to a Health Savings Account. This account offers a tax-advantaged way for individuals to save and pay for healthcare costs. Its main objective is to offer a straightforward means to cover qualified medical expenses. It operates similarly to a debit card, allowing account holders to use pre-tax funds for eligible health-related services and items. This system simplifies healthcare finance management by leveraging tax benefits for approved expenditures.

Understanding Eligible Medical Expenses

Understanding eligible expenses is fundamental for maximizing HSA card benefits. The Internal Revenue Service (IRS) defines eligible medical expenses as costs primarily incurred for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. This broad definition encompasses a wide array of healthcare services and products, excluding expenses for general health improvement, such as vitamins for general well-being or cosmetic procedures without medical necessity.

Eligible expenses include general medical services. This includes visits to doctors and specialists, hospital stays, and surgical procedures. Prescription medications, diagnostic tests, laboratory fees, and imaging services are also covered. Out-of-pocket costs like deductibles, copayments, and coinsurance for covered medical care can be paid using HSA funds.

Dental care is another broad category of eligible expenses. Most standard dental procedures qualify, such as routine cleanings, examinations, fillings, root canals, and extractions. More involved treatments like crowns, dentures, and bridges are also covered. Orthodontic treatments, including braces, are eligible when they address a medical necessity.

Vision care expenses are also permissible for HSA use. This includes comprehensive eye examinations, prescription eyeglasses, and contact lenses, along with their associated cleaning solutions and supplies. Vision correction procedures, such as LASIK eye surgery, also qualify. This coverage ensures that essential vision correction and maintenance can be funded with pre-tax dollars.

Mental health services are recognized as qualified medical expenses. Therapy sessions, counseling services, and psychiatric care are eligible, especially when these services are provided to treat a diagnosed mental health condition. This category covers consultations with psychiatrists, prescribed psychiatric medications, and specialized treatment programs like substance abuse rehabilitation. Alternative mental health treatments, such as acupuncture, are covered if recommended by a medical professional for a specific medical condition.

Preventive care expenses are explicitly eligible under HSA guidelines. This includes services designed to prevent illness or detect health issues early, such as routine physical examinations, immunizations, and health screenings. The IRS has expanded its definition of preventive care to include certain services and items for individuals managing chronic conditions like asthma, diabetes, or heart disease. This expansion ensures proactive management of these conditions can be funded without meeting a deductible.

Over-the-counter (OTC) medications and products have seen expanded eligibility for HSA use following recent legislative changes. Many OTC medications, such as pain relievers, cold and flu remedies, antacids, and allergy medications, no longer require a prescription for HSA purchase. Health-related products, including feminine hygiene products, bandages, and diagnostic items like blood sugar test kits, are also eligible. This broadens the scope of everyday health items payable with tax-advantaged funds.

Durable Medical Equipment (DME) is another important category. These are medically necessary items prescribed by a doctor for use in the home. To qualify, DME must be long-lasting (typically at least three years) and used for a medical reason, not general convenience. Common examples include wheelchairs, walkers, crutches, hospital beds, CPAP machines for sleep apnea, and blood pressure monitors.

Long-term care expenses can also be paid with HSA funds. This includes payments for medically necessary long-term care services in facilities like assisted living communities or skilled nursing homes, though room and board costs are typically excluded. Premiums for qualified long-term care insurance policies are eligible, subject to annual IRS limits based on the account holder’s age. For instance, in 2025, the deductible premium limit for individuals aged 51 to 60 is $1,800, increasing to $6,020 for those 70 and older.

Certain other specific treatments and services also qualify. Chiropractic care is eligible when used to treat a specific medical condition. Fertility treatments, including in vitro fertilization (IVF) procedures, fertility medications, and diagnostic testing, are eligible if performed on the account holder, their spouse, or an eligible dependent. Acupuncture is also an eligible expense when used for the diagnosis, cure, mitigation, treatment, or prevention of a disease, often requiring a Letter of Medical Necessity from a healthcare provider.

Accepted Locations and Methods of Payment

An HSA card provides a convenient method for paying for qualified medical expenses across a wide range of providers and retailers. You can use your HSA card at healthcare facilities such as doctor’s offices, hospitals, dental clinics, and vision centers. These establishments are set up to process medical payments, allowing direct use of the card for services rendered.

Many pharmacies and general merchandise stores with health-related sections also accept HSA cards. Major retailers, including large grocery chains with pharmacies and big-box stores, have systems to identify eligible items. This allows you to purchase qualifying over-the-counter medications and health supplies directly using your HSA card. Online purchases from qualified healthcare providers, pharmacies, and dedicated HSA/FSA stores are also accepted, functioning like any other online debit transaction.

The seamless processing of HSA card transactions at various retail locations is largely due to the Inventory Information Approval System (IIAS). This IRS-mandated point-of-sale technology helps merchants automatically identify and separate eligible medical expenses from non-eligible purchases. When you swipe your HSA card at a store with an IIAS, the system reviews each item, approves eligible ones, and may prompt for a separate payment method for non-qualified items. This automatic substantiation reduces the need for account holders to submit receipts.

Some merchants, particularly pharmacies where over 90% of sales are HSA-eligible, may operate under a “90% rule” certification. This allows for direct card use, but account holders may need to retain receipts for potential manual substantiation by their HSA administrator. If a merchant does not have an IIAS or is not certified under the 90% rule, your HSA card transaction might be declined. In such cases, you would need to use an alternative payment method and seek reimbursement from your HSA, necessitating careful record-keeping.

The HSA card functions like a standard debit card. You can swipe, insert, or manually enter card details for online transactions. Depending on the merchant’s system, you might be asked to enter a Personal Identification Number (PIN) or sign. Funds are instantly deducted from your HSA balance, providing a direct and efficient way to manage healthcare spending.

Navigating Non-Eligible Purchases

Using an HSA card for non-eligible purchases carries significant financial repercussions. The Internal Revenue Service (IRS) strictly defines qualified medical expenses; spending HSA funds on non-eligible items can lead to penalties and increased tax liability. Common examples of non-eligible expenses include general health items like vitamins or nutritional supplements not prescribed for a specific medical condition, toiletries, and cosmetic procedures solely for aesthetic enhancement.

Other non-qualifying expenditures include premiums for standard health insurance plans, with exceptions for Medicare, COBRA coverage, and qualified long-term care insurance. Expenses already reimbursed by another source, such as a health insurance plan, are not eligible for HSA payment. Services not primarily for medical care, such as health club dues, elective personal care items, or childcare for a healthy baby, are not eligible expenses.

If an HSA card is used for a non-eligible purchase, the withdrawn amount is taxable income. This means funds, initially tax-free upon contribution, become subject to ordinary income tax. If the account holder is under 65, disabled, or deceased, the non-qualified distribution incurs an additional 20% penalty. For instance, a $1,000 non-eligible withdrawal by someone under 65 could result in a combined tax and penalty amounting to several hundred dollars, eroding the withdrawal’s value.

The 20% penalty is waived if the account holder is 65 or older, becomes disabled, or upon death, but the amount remains subject to income tax. Account holders must track and report all HSA distributions, including non-qualified ones, on their annual tax return using IRS Form 8889. Understanding these distinctions helps avoid unintended tax consequences and ensures the HSA’s tax-advantaged status.

Documentation for HSA Transactions

Maintaining thorough documentation for all HSA transactions is a responsibility for the account holder. While the HSA card offers convenience, proving an expense is qualified rests with the individual, particularly during an IRS audit. This diligence ensures all HSA tax benefits are realized and penalties for non-qualified distributions are avoided.

Essential documents include itemized receipts, Explanation of Benefits (EOB) statements from your health insurance provider, and invoices or statements from healthcare providers. Each record should detail the date of service, provider name, service or item description, amount paid, and for whom the expense was incurred. These specifics are crucial for substantiating the medical nature of the expense.

A common guideline is to retain records for at least three years after filing the tax return for the year the expense was incurred, aligning with the general IRS audit period. Some advisors suggest keeping records for seven years, or indefinitely if you plan to reimburse yourself for out-of-pocket medical expenses in the future. Account holders can use physical filing systems, digital scans, or record-keeping features provided by HSA administrators through online portals or mobile applications.

HSAs operate on a self-substantiation model. This means the account holder is responsible for determining the eligibility of each expense and maintaining proof, rather than a third-party administrator automatically verifying every transaction. Diligent record-keeping is a fundamental practice for compliant and financially sound HSA management.