By - October 14, 2021

Understanding Your HSA Qualified Expenses

HSA Qualified Expenses

Your Health Savings Account, or HSA, is an incredible benefit and resource for you to use, and is quite simple to utilize. First you need to understand HSA qualified expenses.

What is an HSA?

An HSA is a personal bank account, paired with your high deductible health plan (HDHP), to help you manage your health expenses and receive tax savings on anything that’s medical, dental, or vision related. Consider it a 25% coupon off  qualified expenses, once you know what these HSA qualified expenses are.

Who can contribute to an HSA?

  • You
  • Your employer
  • A third party

How HSAs work

You and your employer can set aside funds on a tax-free basis to pay for certain out-of-pocket medical expenses – these are the HSA qualified expenses we were talking about. Keep in mind that there is a cap on how much you can contribute. In 2021, the maximum individual contribution is $3650 and $7200 for families. For 2022, you can contribute $3600 as an individual or $7300 for a family.

Why choose an HSA for qualified expenses?

There is a triple tax benefit with any HSA. These funds:

  • Go into the account tax-free
  • Grow tax-free
  • Remain tax-free

The funds in your HSA account remain there forever. Even if you are no longer able to contribute to your account, if you switch employers, or if you no longer opt for a high deductible health plan, it will be there for you to use.

What about HSA rollovers?

Employees can rollover unused HSA funds. Learn more about HSA rollovers.

HSA qualified expenses vs. ineligible expenses

To help alleviate confusion in determining how to determine qualified expenses vs ineligible expenses – an HSA qualified expense must be primarily to alleviate or prevent a physical or mental defect or illness, including dental and vision. This includes a health crisis or any sort of diagnosis (from a medical practitioner) of a disease or illness, and care, treatment or prevention of a disease or illness. Ineligible expenses are those incurred for general health or well-being. 

For example, a visit to the chiropractor alleviates pain or discomfort (or can prevent it), but your gym membership does not.

HSA qualified expenses are determined by Internal Revenue Code (IRC) Section 223 See Full List of Qualified HSA Expenses. and you can find the full list there. Below is a partial list:

  • Acupuncture
  • Alcoholism
  • Ambulance
  • Artificial Limb
  • Artificial Teeth
  • Bandages
  • Birth Control Pills
  • Body Scan
  • Braille Books and Magazines
  • Breast Pumps and Supplies
  • Breast Reconstruction Surgery
  • Capital Expenses
  • Chiropractor
  • Christian Science Practitioner
  • Contact Lenses
  • Crutches
  • Dental Treatment
  • Diagnostic Devices
  • Disabled Dependent Care Expenses
  • Drug Addiction
  • Drugs
  • Eye exam
  • Eyeglasses
  • Eye Surgery
  • Fertility Enhancement
  • Guide Dog or Other Service Animal
  • Hearing Aids
  • Home Care
  • Home Improvements
  • Hospital Services
  • Laboratory Fees
  • Learning Disability
  • Legal Fees
  • Lifetime Care – Advance Payments
  • Lodging and Meals
  • Long-Term Care
  • Medical Information Plan
  • Nursing Home
  • Nursing Services
  • Operations
  • Optometrist
  • Osteopath
  • Oxygen
  • Physical Examination
  • Pregnancy Test Kit
  • Psychiatric Care
  • Psychoanalysis
  • Psychologist
  • Special Education
  • Sterilization
  • Stop-Smoking Programs
  • Surgery (non-cosmetic)
  • Therapy
  • Transplants
  • Transportation
  • Vasectomy
  • Vision Correction Surgery
  • Wheelchair
  • Wig
  • X-ray

Ineligible medical expenses include:

  • Baby Sitting, Childcare, and Nursing Services for a Normal, Healthy Baby
  • Controlled Substances
  • Cosmetic Surgery
  • Dancing Lessons
  • Diaper Service
  • Electrolysis or Hair Removal
  • Funeral Expenses
  • Hair Transplant
  • Health Club Dues
  • Household Help
  • Illegal Operations and Treatments
  • Insurance Premiums
  • Maternity Clothes
  • Medicines and Drugs from Other Countries
  • Nonprescription Drugs and Medicines
  • Nutritional Supplements
  • Personal Use Items
  • Swimming Lessons
  • Teeth Whitening
  • Veterinary Fees

Your HSA is available for you to use for anyone you claim on your taxes, even if they are not on your insurance plan.

You can either start settings funds aside for anticipated medical expenses or make small deductions throughout the year. In addition, you do not need to pre-fund your account, or even know how much you might spend in the upcoming year. If it turns out you estimated incorrectly, you can change your payroll deduction once a month if you’d like to adjust the amount.

An additional option is to pay for each expense out of your own pocket and get a tax-free reimbursement from your HSA account. A receipt of your expense and details regarding type of payment would be necessary.

Originally posted June 27, 2018
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