What happens if I buy something with my HSA for non-medical expenses?
Asked by: Princess Windler | Last update: November 23, 2025Score: 4.5/5 (60 votes)
What happens if you spend HSA for non-medical expenses?
In addition, if HSA funds are withdrawn before age 65 and not used for eligible medical expenses are generally subject to an additional 20% tax penalty. In other words, you may lose the tax benefits when you use HSA for non-medical expenses. There may also be a significant tax fee or penalty.
How does the IRS know if you use HSA for non-medical?
Verification of expenses is not required for HSAs. However, total withdrawals from your HSA are reported to the IRS on Form 1099-SA. You are responsible for reporting qualified and non-qualified withdrawals when completing your taxes.
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 happens if I use a HSA card for groceries?
If you use your HSA for an expense other than eligible medical expenses you can subject yourself to significant IRS penalties. Inappropriate use of your HSA funds may also leave you without money to pay for your eligible medical expenses in the future.
What happens if I use my HSA for a nonqualified expense?
What happens if you accidentally buy something on HSA?
Accidentally using your Health Savings Account (HSA) to pay for something other than a qualified medical expense is correctable. You can repay the incorrect distribution before filing your federal taxes for that tax year.
Is it illegal to use HSA money for anything?
You generally can't use HSA funds to pay premiums. Once you turn 65, you can use the money in your HSA for anything you want. If you don't use it for qualified medical expenses, it counts as income when you file your taxes.
How does HSA know what you buy?
Because HSA administrators don't track the purchases employees make with their HSA, employees should make it a habit to save receipts for all HSA-eligible goods and services, so they can easily reimburse themselves when they are ready, or when they need the money.
Does IRS ask for receipts for HSA?
Always save your receipts and supporting documentation for your records. While Benefit Resource will not ask you to provide a receipt for an HSA expense, you are responsible for maintaining documentation of account use in the event that you are ever audited by the IRS.
Can I use my HSA to pay for yoga?
Fitness fees do not immediately qualify as eligible HSA/FSA expenses, but they do qualify if a provider recommends exercise to prevent or treat a medical condition. To qualify those expenses for reimbursement with an HSA/FSA administrator, you need a Letter of Medical Necessity from a provider.
What is the downside of an HSA?
Drawbacks of HSAs include tax penalties for nonmedical expenses before age 65, and contributions made to the HSA within six months of applying for Social Security benefits may be subject to penalties. HSAs have fewer limitations and more tax advantages than flexible spending accounts (FSAs).
Can I 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 is the 12 month rule for HSA?
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 you buy toilet paper with HSA?
Toiletries are not eligible for reimbursement with a flexible spending account (FSA), health savings account (HSA), health reimbursement arrangement (HRA), limited-purpose flexible spending account (LPFSA) or a dependent care flexible spending account (DCFSA).
Can I buy vitamins with HSA?
In general, vitamins are not considered an HSA eligible expense unless they are prescribed by a doctor for a specific medical condition.
Can I use my HSA for massage?
Your HSA can pay for massage therapy, though you'll likely need a letter of medical necessity (LMN) from your doctor. An LMN states what condition the treatment is for, how many sessions you need, and any other relevant details. An HSA may also be used on alternative or holistic treatments, such as: Massage therapy.
Do I have to report HSA purchases?
Form 8889 is submitted with your tax return via Form 1040 or Form 1040-SR to report a distribution from the account, even if it's not taxable. If you took a taxable distribution from your HSA, this is where you report that. You also report contributions and any deductions related to your HSA on this form.
What happens if I don't report my HSA on taxes?
Other relevant forms include Form 8889 for HSA reporting on your tax return and IRS Form 5329 for excess contributions. Not reporting contributions or distributions for your HSA can result in penalties and interest, affect taxable income calculations, require amended returns, and increase the risk of an IRS audit.
How does the IRS track HSA?
The 1099-SA is used to report any distribution (withdrawal) of funds from your HSA during the prior year. You must report distributions from your HSA on IRS Form 8889. You will receive a separate 1099-SA for each type of distribution made during the tax year.
What happens if I accidentally use my HSA card for non-medical expenses?
Unfortunately, you can't just let mistakes like this slide. You can be charged a 20% penalty if you use your HSA funds to pay for a non-qualified medical expense, which would have been $70 in my case (not to mention traditional income taxes would apply, too).
What is HSA receipt loophole?
The Adult Child HSA Family Contribution Loophole
That's why you can do things like save receipts for decades and then pull the money out of the account. That's why you can use it as a stealth IRA by investing in it for decades and then pulling it out after age 65 penalty-free and buying a sailboat with it.
What happens if I buy something not covered by my HSA?
Be very careful not to use your HSA debit card or checks on non-eligible purchases. If you spend your HSA funds on unqualified expenses, whether intentionally or by accident, the transaction will go through, and you'll have to pay income tax on the amount.
What if I accidentally bought food on my HSA?
If you realize you've made a mistake and want to correct it, simply return the money to your HSA and you will avoid the additional penalty. If you do not return the money to your HSA, it will be counted as taxable income, and even worse, you'll have to pay a 20% penalty.
Can you spend HSA on non-medical?
Before we dive into the details, let's answer the fundamental question: Can you use an HSA for non-medical expenses? The short answer is yes. While HSAs are primarily designed to cover medical costs, they offer some flexibility when it comes to non-medical expenses as well.
What is the penalty for using HSA for non-medical?
IRS penalty and taxable income
Prior to age 65, if you use your money for non-qualified expenses, the IRS imposes a hefty HSA withdrawal penalty of 20 percent on the amount withdrawn. For example, if you spend $500 on non-qualified expenses, your penalty will be $100.