How Can I use HSA Money?

How Can I Use HSA Money? 

The funds in your HSA can be used to pay for qualified medical expenses incurred by you, your spouse, and your dependents. The IRS establishes what is and what is not a qualified medical expense, detailed in IRS Publication 502, Medical and Dental Expenses. Generally speaking, qualified expenses include amounts paid to diagnose, cure, mitigate, treat, or prevent disease, and to treat conditions that affect any part or function of the body.

Keep in mind that you can use the account for more than the expenses you incur under your main health insurance plan. For example, if your plan doesn't cover dental or vision care, HSA could be especially helpful in meeting these bills.

However, you can't use it to pay insurance premiums, with the exception of those for supplementary Medicare coverage or long-term care insurance. Other ineligible expenses include the cost of toothpaste, toiletries, cosmetics, and most cosmetic surgery. And the vacation you made to a healthier climate? Don't even think of tapping your HSA.

Basically, pharmaceutical or quasi-medical items that don't require a prescription, like nicotine gum and nicotine patches, cannot be covered with HSA funds.

If you're 64 or younger and withdraw funds for a non-qualified expense, you'll owe taxes on the money (which will be taxed as income), plus a 20% penalty. If you're 65 or over, or disabled at any age, you'll still owe taxes on the amount but be spared the penalty.

So, frankly, after age 65, you can essentially withdraw HSA funds for…anything.