Can I overspend on my HSA card?
Asked by: Robb Parker | Last update: November 4, 2025Score: 4.1/5 (5 votes)
What happens if you overspend on HSA?
The IRS imposes a 6% excise tax on any excess accumulation in your HSA. This tax is applied each year until the excess amount is withdrawn from the account. The excise tax is in addition to any income tax you may owe on the excess contribution.
Can you overdraft on an HSA card?
Yes, an HSA can be overdrawn. There is no overdraft fee, but an HSA can be overdrawn for a variety of reasons. If your HSA does become overdrawn, it is important to resolve it quickly or your account may be closed.
What happens if I put too much money in my HSA account?
What happens if I contribute more than the IRS annual maximum? If your HSA contains excess or ineligible contributions you will generally owe the IRS a 6% excess-contribution penalty tax for each year that the excess contribution remains in your HSA.
What happens if I don't have enough money in my HSA?
If you do not have enough money in your HSA to pay for an eligible medical expense you will need to pay for the expense by some other means. Once the money is in your HSA account, you can withdraw the amount that you paid and reimburse yourself.
What Can the HSA Debit Card Buy? (What Can You Purchase with HSA Funds?)
What happens when my HSA balance is $0?
Will my HSA account remain open if I have a $0 balance? The account will remain open if you have a $0 balance. There is no fee assessed to you for having a $0 balance.
What happens to leftover money in HSA?
Unlike many other health plans, the balance in your HSA account carries over indefinitely. This means that any extra money you have at the end of the year does not disappear or reset. Instead, it remains in your account and continues to grow over time.
What happens if I add too much to my HSA?
Possible Repercussions. Any excess funds added to your HSA account are subject to both income tax and an additional 6% excise tax. Both taxes are applied each year until your contribution amount is corrected. The good thing is these taxes are processed with your yearly tax return.
How much should I put in my HSA per paycheck?
You can start small, perhaps setting aside $25 to $50 per paycheck. Consider also trying to cut back on non-essential spending, such as foregoing one of your app subscriptions, reducing meals out or making your morning cup at home versus going to a coffee shop.
Can I buy a hot tub with my HSA?
In very rare cases, a TPA may deem a hot tub as eligible with a Letter of Medical Necessity (LMN) which details that the only reason for purchasing this device is to treat a specific medical condition.
What triggers an HSA audit?
Does HSA spending trigger an audit? The IRS doesn't monitor how you spend your HSA funds throughout the year, but that doesn't mean they won't ask for proof that your expenses were eligible. And if your tax return contains unrelated IRS audit red flags, your risk for an HSA audit could increase.
What is the 12 month rule for HSA?
About the IRS' last-month rule testing period and penalty
It means you must remain eligible for the HSA until December 31 of the following year. The only exceptions are death or disability. If you violate the testing period requirement, your ineligible contributions become taxable income.
Can I take out money in my HSA?
You can withdraw funds from your HSA at any time to cover qualified medical expenses, which are listed below. The amount you can withdraw in a given year varies based on your medical costs.
Can I overdraft on my HSA?
All overdrafts, including those created by a transaction, a fee, or an oversight, are prohibited. If an overdraft occurs on the HSA, the bank is required to close the account and report the January 1 balance as a nonqualified distribution.
Should I keep cash in my HSA?
Determine if you plan to use your HSA to pay for current qualified medical expenses or if you will pay from another source of personal savings. Consider setting aside a "cash target"—the amount of cash in your HSA used to pay for current qualified medical expenses. Then consider investing the remaining amount.
Why is TurboTax saying I overfunded my HSA?
Make sure you didn't accidentally re-enter the amount already listed (from box 12 of your W-2) as this will incorrectly double your total contribution amount. Continue through the HSA screens, making sure you answered all questions correctly.
Is it smart to max out your HSA?
If you're able to make the maximum contribution each year, then it's suggested that you do so. Some years you may need to use more of your HSA contributions than other years. Just remember, there's no yearly minimum you have to spend from your HSA and your entire HSA automatically rolls over each year.
Can you use HSA for dental?
Your HSA also covers expenses for standard dental cleanings and dental check-ups. One thing to keep in mind is that some of these procedures may have a co-payment, so it's important that you check with your dental insurance provider to find out exactly what you'll have to pay out of pocket.
What is a good HSA balance?
If you're unsure of where to start, try working with a financial advisor. What Is the Average HSA Balance By Age? The average HSA balance for a family is about $7,500 and for individuals it is about $4,300. This average jumps up to $12,000 for families who invest in HSAs.
What happens if you overspend your HSA?
An overdrawn balance in your HSA will be considered a prohibited transaction. Per IRS section 4975, if you engage in any prohibited transaction throughout the year, your HSA ceases to be classified as an HSA retroactive to January of the current year.
Can I put extra money in HSA?
You can no longer make contributions to your HSA; however, your HSA funds are available to you to use to pay for qualified health care expenses. Can I use tax-free HSA funds to reimburse myself for IRS-qualified health care expenses? Yes.
How do I know if I overfunded my HSA?
You will see the total amount of your excess contributions for the year on IRS Form 8889, Health Savings Accounts (HSAs). This amount is taxable income. If the excess contributions are from your employer, they will include them in your wages when they report them on your W-2.
Can you use HSA for gym membership?
Gym memberships. While some companies and private insurers may offer discounts on gym memberships, you generally can't use your FSA or HSA account to pay for gym or health club memberships. An exception to that rule would be if your doctor deems fitness medically necessary for your recovery or treatment.
What happens if you don't use the money in your HSA?
Myth #2: If I don't spend all my funds this year, I lose it. Reality: HSA funds never expire. When it comes to the HSA, there's no use-it-or-lose-it rule. Unlike Flexible Spending Account (FSA) funds, you keep your HSA dollars forever, even if you change employers, health plans, or retire.
Can you use HSA for glasses?
Both FSA and HSA pre-tax health accounts can be used to pay for prescription glasses, contact lenses, eye exams and more. Eyewear that corrects your vision is considered a medical product, which means you can use your health plans to help cover the cost.