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Using Your HSA Money

The key to spending your HSA money is to only use it for qualified medical expenses for yourself, your spouse and your tax dependent children (if you claim them on your tax return, you can use their expenses).  A qualified medical expense is an expense used primarily to prevent or treat a medical condition.  Some of these should be obvious, such as meeting the deductible for medical services covered by your health plan.  But many medical services that are not covered by your health plan are also eligible.  These could include prescriptions, office visits, annual physicals, even out-of-country treatments.  A good general rule here is if it treats a medical condition, it is eligible.  You can use HSA money for over-the-counter medicines, however you will need a script written by a doctor to be considered an eligible medical expense. Expenses for vision and dental care are also considered eligible.  So you can pay for contact lenses and braces for your teen-ager tax free using your HSA account.  But be careful.  There is an ineligible list too.  You can’t use HSA dollars to pay for cosmetic procedures, botox, gym memberships, or teeth whitening, to name a few. Your age matters when it comes to the IRS rules for determining how much of a long-term care premium in a qualified medical expense. For details see IRS publication 502. 


You can also use your HSA money for specific insurance premiums.  This list is small and easy.  It includes health insurance premiums if you are receiving federal or state unemployment benefits and COBRA benefits.  In addition, HSA money can pay for Medicare premiums and long-term care insurance.


When it comes to using your HSA money for medical expenses that fall under your high deductible such as office visits, it is usually best not to pay at the point of service.  In other words, don’t pay for the office visit when you are at the doctor’s office.  Let the doctor’s office bill your health insurance first.  That ensures you receive your network discounts and that the correct amount is applied to your deductible.  After that, the doctor’s office will bill you what you owe and you can use your HSA to pay the amount due.  One exception to this rule is at pharmacies where they require payment at the time of purchase.  Just make sure that they bill your health insurance and give you any discounts that should apply.


Whenever you spend money out of your HSA, keep the receipts so that, if needed, you can prove that the money was spent on eligible expenses.  And if you spend your HSA money on something other than eligible expenses (like a new car), you will owe taxes on that money, plus you will incur an additional 20% penalty on that amount if you’re under the age of 65.


Key point for eligible dependents: even though with health care reform you can now cover adult children up to the age of 26 on your health insurance plan, you can only use your HSA money for eligible medical expenses for yourself, your legal spouse and tax dependent children (that means children whom you claim as tax dependents on your tax return).


Sample List of Eligible HSA Medical Expenses

Contact Information:
Rockford Insurance in Michigan
PO Box 265
Rockford, MI 49341
Phone 616.361.2550
The Rockford Insurance promise that gives peace of mind

Our mission is to make insurance "a promise that gives peace of mind". We understand that insurance is a promise, a promise that when sickness, accident or death occurs, the insurance will provide a source of funds to help make you whole again. The promise isn't only the insurnace policy but also the on-going service and personal care needed during a time such as this.  
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