What can you buy with HSA funds?

Most of us don’t want to shell out hard-earned cash to pay for things that keep us healthy enough to earn that cash. So if you’re a fan of saving money—and who isn’t?!—you probably jump at any opportunity to save on medical expenses.

A Health Savings Account (HSA) helps us do just that.

HSAs allow us to reserve pre-tax funds to pay for qualified medical expenses. That means we can save up to 40% on doctor copays, prescriptions and other health services.

If we’re savvy, we can also save on lesser-known qualified expenses.

Read on for the nitty gritty on how to use an HSA for optimum financial health. Plus, how qualifying patients may be able to get the Letter of Medical Necessity needed for some items and services to qualify—online!

What is an HSA—and how do I get one?

HSA accounts are savings accounts that can be used to pay for qualified medical expenses. They’re available to those with an HSA-eligible plan—sometimes called a High Deductible Health Plan (HDHP).

High deductible plans have low monthly premiums but high deductibles—the amount you pay out of pocket before your insurer will cover all medical care costs. For 2024, the IRS defines an HDHP as having an annual deductible of at least $1,600 for a single person or $3,200 for a family. Out-of-pocket expenses can’t exceed $8,050 for a single person or $16,000 for a family.

If you have Medicare coverage, you can’t contribute to an HSA. (If you opened one before going on Medicare, you’ll have to use those funds or let them sit.) You also can’t have an HSA if you have a health plan that covers services without a copay or deductible.

You can get an HSA through your insurer, banks, credit unions, and other financial institutions.

How do HSA contributions save me money?

HSAs are a type of tax-advantaged account. They’re sometimes referred to as having a triple tax advantage because they can help you save money on taxes in three ways.

First, if you open an HSA through your employer’s health plan, any funds they contribute are not subject to income tax. (So you’re essentially lowering your taxable income.) If you deposit money outside of payroll, you can deduct that amount on your yearly tax return.

The IRS determines the limit of how much cash you can deposit annually (contribution limits.) For 2024, a single person can deposit up to $4,150 and a family up to $8,300. Those 55 and older can add another $1000 to the pot.

Secondarily, HSA accounts incur interest. While you can only deposit a limited amount every year, unused funds roll over to the following year. So with time, you can earn interest on increasingly saved funds. Most accounts offer nominal interest rates, so they’re generally not used for incurring growth. But again—anything left in your account remains untaxed.

Some HSA providers also allow you to invest a portion of your banked funds. Many limit this avenue, though. So check with your HSA manager if you’re curious.

The third (and most significant) tax advantage? You can withdraw funds for qualified medical expenses. And because those funds remain un-taxed, you’ll pay less for your medical costs.

What are the HSA withdrawal rules?

You can withdraw funds for any reason.

But if you’re under 65 and you withdraw funds for non-medical expenses, you’ll pay a 20% HSA withdrawal penalty fee on the amount. And you’ll pay income tax on the amount you withdraw.

After age 65, you’ll pay income tax on funds you withdraw for non-medical costs. But you won’t be penalized for withdrawing the funds as you might be with other retirement accounts.

Otherwise, you’re good to go if you use HSA reimbursement funds to pay for qualified medical and dental expenses.

What can HSA be used for?

The IRS determines what qualifies as a medical expense. General qualified health care expenses include insurance premiums, annual exams, lab fees, scans, eye exams, dental treatments and surgeries.

Further qualified medical expenses include:

• Abortions
• Birth control pills, patches, etc.
• Pregnancy tests and fertility procedures
• Vasectomy procedures
• Breast pumps and supplies
• Breast reconstruction surgery
• Acupuncture services
• Chiropractic services
• Alcoholism and drug addiction services (in-patient treatment, transportation to AA etc.)
• Ambulance services
• Home improvement for disability accommodations
• Eye exams, surgeries, eyeglasses and contact lenses
• Guide dogs or other service animals
• Dental treatments
• Crutches, walkers, wheelchairs and other ambulatory devices
• Hearing aids
• Weight loss programs
• Braille books and magazines and televisions with captioning
• Psychology, psychiatry or therapy sessions
• Nursing and other home services

Some of the above only qualify if you have a related medical condition. For example, you can only use HSA funds to buy a television with closed captioning if you are deaf or have other hearing loss.

On top of the above, you can use HSA funds to buy a broad range of devices and supplies. Often collected online in “HSA stores,” these can include smart scales to help with weight management, heating pads to temper arthritis pain and Covid-19 protective items like masks, hand sanitizer, tests or air purification systems.

If you have any questions about whether or not an upcoming purchase may qualify, talk to your HSA manager.

Can I use HSA for gym membership?

If you exercise to prevent or treat a long list of medical conditions, you may be able to use HSA funds to pay for applicable expenses! If eligible, your tax reductions will help you save up to 40% on gym memberships, fitness class fees, personal training sessions, health apps and more.

The caveat? For those expenses to qualify, you need a Letter of Medical Necessity from a licensed provider detailing how exercise is a treatment for your condition.

Fortunately, Dr. B may be able to help you skip the waiting room and get a Letter of Medical Necessity online! Just take a $15 consultation—no appointment or video meeting required. We’ll connect you with a licensed provider. If you qualify, they’ll email your letter within three working hours.

Learn more from Dr. B about using HSA funds for gym and other fitness fees—including how to use Flexible Spending Account (FSA) funds for fitness, too.

Can I use HSA for massage?

If you get a massage to work out the soreness from an awesome workout, you can’t use your HSA to pay for it.

But if you have a medical condition, injury or disability and a provider states that a massage may ease or treat related symptoms, HSA withdrawal rules may qualify the expense as medically necessary!

You’ll need a provider to write a Letter of Medical Necessity before you can file rehabilitation therapy receipts for HSA reimbursement. So if you have a condition like chronic pain, fibromyalgia, headache, PTSD, stress, sleep disorders and many more, learn more about HSAs and medical massage from Dr. B.

Or take a $15 rehab consultation to find out if you can get a Letter of Medical Necessity for massage online!

Sources:

Health Insurance Marketplace. (2023). What’s a health savings account?

Internal Revenue Service. (2023). Administrative, procedural, and miscellaneous tax forms and instructions. 26 CFR 601.602.

Internal Revenue Service Department of the Treasury. (2023). Publication 502: Medical and dental expenses.