Qualified Medical Expenses: What Your HSA Can and Cannot Pay For

How the IRS Defines a Qualified Medical Expense

The IRS governs what your Health Savings Account can and cannot pay for through Publication 502, which defines a qualified medical expense as any cost incurred for the diagnosis, cure, mitigation, treatment, or prevention of disease — or for treatments affecting any structure or function of the body. That definition sounds broad, but the IRS applies it with meaningful precision, and the line between reimbursable and non-reimbursable spending is not always intuitive.

One foundational point worth anchoring here: your HSA can only pay for qualified medical expenses free of tax and penalty if you were enrolled in an IRS-eligible high-deductible health plan (HDHP) when you made the HSA contribution. The spending rules themselves, however, stay with the account indefinitely — meaning funds already saved can continue to be used for qualified expenses even after you leave HDHP coverage. See what happens to your HSA when you leave an HDHP for a complete breakdown of that distinction.

There are three tax outcomes you need to keep straight:

• Qualified expense, properly documented: Withdrawal is tax-free and penalty-free.
• Non-qualified expense before age 65: The amount is added to your gross income and subject to a 20% penalty.
• Non-qualified expense after age 65: The amount is added to your gross income, but the 20% penalty no longer applies — effectively making it function like a traditional IRA distribution.

Understanding which category a given expense falls into is not merely academic. Over a decade of HDHP enrollment, an HSA that routinely pays for ineligible items will compound the tax cost of those errors significantly.

What Your HSA Can Legitimately Pay For

The list of IRS-approved expenses is genuinely expansive. Below is a structured reference covering the most common categories consumers encounter. This is not exhaustive — Publication 502 contains dozens of additional items — but it reflects the spending patterns most relevant to everyday healthcare planning.

Prescription Medications and Medical Devices

• Prescription drugs (any drug requiring a prescription under federal law)
• Insulin — notably, over-the-counter insulin became HSA-eligible without a prescription after the CARES Act of 2020
• Durable medical equipment: wheelchairs, crutches, blood sugar monitors, CPAP machines
• Hearing aids and batteries
• Eyeglasses, contact lenses, and contact lens solution
• Prosthetics and orthotic devices

Dental and Vision Care

HSA funds can cover a wide range of dental costs that are often only partially reimbursed by insurance — or not at all. This includes preventive cleanings, X-rays, fillings, extractions, root canals, crowns, dentures, and orthodontic treatment. Cosmetic procedures like teeth whitening, however, are excluded. For a detailed view of how HSA funds interact with dental plan structures, see using a dental FSA or HSA alongside your insurance plan.

Vision expenses that qualify include eye exams, prescription eyeglasses, prescription sunglasses, contact lenses, and LASIK surgery. Non-prescription sunglasses and purely cosmetic vision corrections are not covered.

Mental and Behavioral Health

• Psychotherapy and psychiatric treatment
• Inpatient mental health treatment
• Substance abuse treatment (including residential programs)
• Smoking cessation programs and prescription cessation aids

Long-Term and Chronic Care Costs

For those managing chronic conditions or aging into higher healthcare utilization, HSA funds can cover nursing home fees (when medical care is the primary reason), in-home nursing care, physical therapy, occupational therapy, and medically necessary home modifications such as wheelchair ramps or grab bars. Costs that are primarily for personal comfort rather than medical necessity — even in a skilled nursing context — are generally excluded.

Maternity, Fertility, and Reproductive Care

• Prenatal care and labor and delivery costs
• Fertility treatments including IVF and egg retrieval
• Breast pumps and lactation supplies (CARES Act expansion)
• Vasectomies and tubal ligations

COBRA and Certain Insurance Premiums

This is an area that surprises many account holders: HSAs generally cannot pay for health insurance premiums. There are three narrow exceptions:

1. COBRA continuation premiums
2. Qualified long-term care insurance premiums (subject to age-based IRS limits)
3. Health insurance premiums paid while receiving unemployment compensation
4. Medicare premiums (Parts A, B, C, and D) — but only after the account holder reaches age 65

Premiums for dental or vision coverage purchased as standalone policies are not among the exceptions, regardless of age.

What Your HSA Cannot Pay For

Knowing the exclusions matters just as much as knowing the inclusions — particularly because some disqualified items look medically adjacent at first glance.

Items Expressly Excluded

• Cosmetic procedures: Elective cosmetic surgery, teeth whitening, hair transplants, and similar treatments whose primary purpose is improving appearance rather than treating a disease or defect
• Health club memberships: General fitness memberships are not deductible, even if a physician recommends exercise. The IRS requires that the expense treat a specific diagnosed condition — not general health maintenance.
• Nonprescription drugs (with one major exception): Before 2020, over-the-counter medications required a prescription to qualify. The CARES Act permanently changed this, making OTC drugs — including pain relievers, allergy medication, and antacids — HSA-eligible without a prescription.
• Nutritional supplements and vitamins: Unless prescribed by a physician to treat a specific diagnosed condition, vitamins and dietary supplements are not qualified expenses.
• Childcare and dependent care: These costs belong under a Dependent Care FSA, not an HSA. Even if childcare enables a parent to work or receive medical treatment, it does not qualify.
• Household help: Even if you need assistance at home due to a medical condition, general household services do not qualify. Only the portion of in-home help attributable to nursing or medical care is eligible.
• Health insurance premiums (with narrow exceptions noted above)
• Funeral and burial expenses
• Maternity clothing

The Gray Zone: Medically Necessary vs. General Wellness

Several expense categories sit in a genuinely ambiguous space. Massage therapy, for instance, is deductible if prescribed by a physician to treat a specific condition like muscle spasms or injury rehabilitation — but not as a general wellness measure. Weight-loss programs follow a similar rule: the cost is deductible if treatment is recommended for a specific disease (obesity, hypertension, cardiovascular disease), but not for general fitness improvement.

Special schools and education for children with disabilities represent another nuanced area. The IRS permits deductions for tuition at schools that specialize in treating learning disabilities or physical conditions — but the qualifying criteria are strict and documentation-dependent.

When in doubt, a written recommendation from a licensed physician describing the specific medical necessity is your primary line of defense in any audit. Without it, a claim that seems medically intuitive may not survive IRS scrutiny.

CARES Act Expansions That Changed the Rules

The Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 made two permanent changes to HSA-eligible expenses that significantly expanded everyday utility:

1. Over-the-counter medications: HSA funds can now pay for OTC drugs — including pain relievers, cold medicine, allergy medication, sleep aids, and antacids — without a physician's prescription. This reversed a 2011 restriction that had required prescriptions for OTC items.
2. Menstrual care products: Tampons, pads, menstrual cups, and similar products are now permanently classified as qualified medical expenses.

Telehealth services also received temporary HSA-related relief under CARES and subsequent legislation, allowing HDHPs to cover pre-deductible telehealth without jeopardizing HSA eligibility — though the permanence of that provision has been subject to ongoing legislative renewal rather than a permanent fix. Check current IRS guidance or consult your plan administrator for the latest status on telehealth-before-deductible rules.

These expansions are not retroactive, but they do apply going forward regardless of when your account was opened. If you have been holding HSA funds from prior years, you can now use them for OTC purchases made after January 1, 2020.

Documentation, Record-Keeping, and Audit Risk

Your HSA administrator does not pre-screen expenses for eligibility. When you swipe your HSA debit card at a pharmacy or pay a provider, no one is verifying in real time that the purchase qualifies. That compliance responsibility falls entirely on you.

The IRS does not require you to submit receipts with your tax return, but you must be prepared to produce documentation if audited. Best practice is to retain:

• Itemized receipts (not just credit card statements) for every HSA expenditure
• An Explanation of Benefits (EOB) from your insurer where applicable
• Physician letters or prescriptions for borderline expenses (special schools, therapeutic treatments, OTC items prescribed for a condition)
• Records of the date, amount, and medical purpose of each expense

The statute of limitations for HSA audit exposure generally mirrors income tax rules — three years from the date you file, or six years if the IRS suspects substantial underreporting. Given that HSA balances can accumulate for decades, particularly for account holders using the account as a long-term investment vehicle as described in Using Your HSA as a Long-Term Investment Vehicle, keeping records organized from the start is not optional — it is foundational.

One structurally useful approach: maintain a dedicated digital folder (or use your HSA administrator's document storage if offered) logging each transaction with its receipt and expense category. If you are deferring reimbursement — paying out of pocket now and intending to withdraw HSA funds years later — that requires even more careful documentation, because you will need to connect a future withdrawal to a past expense that may be years old.

Reimbursing Yourself for Past Expenses

The IRS allows you to reimburse yourself from your HSA for a qualified expense paid out of pocket at any prior time — as long as the expense occurred after the HSA was established and you have not previously claimed it as a deduction elsewhere. There is no deadline by which reimbursement must occur. This makes it possible to build HSA balances over many years while paying current medical costs from other funds, then withdraw HSA money in retirement as a tax-free supplement. The HSA Investing 101 guide covers that strategy in detail. The prerequisite is airtight documentation linking every future withdrawal to a specific historical expense.

For broader planning context — including whether an HDHP and HSA pairing makes sense for your situation — HSA-Eligible Plans and Open Enrollment covers the enrollment-level decisions that set the foundation for everything else.