One of the most important things to know about Health Savings Accounts is that the tax benefits work only if you use your funds for eligible expenses. If you don’t, your withdrawals will be taxed as income, and you’ll also be subject to a 20% additional tax.
Review IRS Publication 502 for the full list of eligible expenses, or use Lively’s “What’s Eligible” search tool.
The only exception is if you become disabled, die, or reach age 65, you can use HSA funds for non-medical expenses without incurring the 20% additional tax. However, those funds will be considered taxable income.
Source: “Revenue Procedure 2003-57: Section 213(d).--Medical, Dental, Etc., Expenses.” Internal Revenue Service. Accessed June 19, 2020. https://www.irs.gov/pub/irs-drop/rr-03-57.pdf.
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