HSA-Eligible Expense

An HSA-eligible expense is any cost the IRS counts as medical care under Section 213(d) of the tax code, which means money from a health savings account can pay for it tax-free. The list is broader than most people expect: doctor visits, hospital bills, prescriptions, dental work, glasses and contacts, hearing aids, chiropractic care, mental health counseling, insulin, over-the-counter medicines and menstrual products (added in 2020), Medicare premiums after 65, long-term care insurance premiums up to age-based limits, and mileage to and from care at 21 cents a mile in 2024.

What is not eligible: health insurance premiums (with a few exceptions like COBRA and Medicare), cosmetic procedures, gym memberships, vitamins without a diagnosis, and anything reimbursed by insurance. The rule people miss is timing. An expense qualifies if it was incurred after the HSA was opened; there is no deadline for reimbursing yourself. So a member can pay a $2,400 dental bill out of pocket in 2024, keep the receipt, let the HSA grow for 20 years, and withdraw the $2,400 tax-free in 2044. Paying a cash price at a facility is eligible too, which is how people on high-deductible plans turn the cash-pay discount into a tax-free purchase. Keep receipts; the IRS can ask for them.

The takeaway: before you pay any medical bill with after-tax money, ask whether it is HSA-eligible. If it is, the HSA is a 22 to 37 percent discount, depending on your tax bracket, on top of whatever price you negotiated.