Health Savings Account Qualified Expenses

The HSA is such a powerful vehicle for long term savings, in fact it can be TRIPLE TAX FREE if used properly (tax deductible contribution, tax deferred growth, tax free distributions)! But the 3rd part of the equation is tax free distributions, and just what exactly are health savings account qualified expenses anyway?

A list of Health Savings Account qualified expenses

HSA’s can be used for a wide variety of medical expenses, including:

  • acupuncture
  • ambulance costs
  • artificial limbs
  • artificial teeth
  • bandages
  • birth control pills
  • contact lenses
  • crutches
  • doctor visits
  • some dental expenses
  • vision care (eyeglasses, contacts, Lasik surgery)
  • hearing aids
  • lab fees
  • prescriptions
  • X-rays

Here’s the full list of health savings account qualified expenses for download

Health insurance premiums aren’t qualified medical expenses ironically, though in some limited cases long term care insurance premiums may be. However, you may use an HSA to pay for Medicare premuims for Parts A, B and D as well as HMO premiums.

The MOST Important Thing About HSA Expenses

Here’s what most people don’t understand. The tax savings are so powerful if you have an HSA that you should literally fund the account to the maximum every year, and NOT USE IT! That’s right, I said not use it – not now at least.

Rather than use the HSA for current medical expenses, you should SAVE ALL OF YOUR RECEIPTS! I scan mine into a file folder on my computer marked “HSA NOT CLAIMED”. The fact is you can use your receipts to withdraw from your health savings account at any time during your life provided you had the health savings account open at the time you incurred the expense.

Saving your health savings account qualified expenses for later reimbursement means you’ll have ultimate flexibility as to when and how you take those withdrawals tax free. Consider your retirement for example, you won’t likely spend the same amount every year. In some years you’ll buy a new car for cash, in others you’ll take a european vacation. Using receipts from years ago to withdraw funds from your HSA may just keep your normal retirement income under a particular tax bracket, reducing your overall taxes.