What happens if I don't use my HSA money?
Asked by: Imani Marvin | Last update: September 22, 2025Score: 4.1/5 (43 votes)
Do you lose your HSA if you don't use it?
If you don't spend the money in your account, it will carryover year after year. Your HSA can be used now, next year or even when you're retired. Saving in your HSA can help you plan for health expenses you anticipate in the coming years, such as laser eye surgery, braces for your child, or paying Medicare premiums.
What happens with unused HSA funds?
Unlike many flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs), unused HSA funds automatically carry over to the following year. Even if your employer provided the account and made contributions, the account belongs to you — so any remaining funds are carried over every year.
Can you eventually cash out an HSA?
As a practical matter, you are allowed to withdraw funds from your HSA at any time for any reason. But if you aren't using the funds to cover a qualified medical expense, then you'll be stuck paying a penalty tax.
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).
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Can HSA investment lose money?
The Cash Account is an interest-bearing, FDIC-insured savings account used to pay for qualified medical expenses. The HSA Investment Account allows you to invest in a broad range of mutual funds. The Investment Account is not FDIC-insured, is not bank guaranteed, and may lose value.
Can I get in trouble for using HSA money?
When health savings accounts aren't used for their intended purposes, account holders are often assessed penalties. When an account holder under the age of 65 uses their health savings account's funds for non-medical expenses, they have to pay income tax on the money spent plus a 20-percent penalty.
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.
Is HSA better than 401k?
Comparing HSAs and 401(k)s
The triple-tax-free aspect of an HSA makes it better for tax management than a 401(k). However, since HSA withdrawals can only be used for healthcare costs, the 401(k) is a more flexible retirement savings tool. The fact that an HSA has no RMD gives it more flexibility than a 401(k).
What is the HSA account loophole?
The ultimate loophole available to almost everyone under the age of 65 in our tax code is the Health Savings Account (HSA). It is the only account you can contribute to and deduct the contribution and then withdraw the money tax free. Think about that, a tax deduction going in and no taxes going out.
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.
Can HSA be used for dental?
Yes, you can use a health savings account (HSA) or flexible spending account (FSA) for dental expenses.
Can I transfer money from my HSA to my bank account?
Online Transfers – On HSA Bank's member website, you can reimburse yourself for out-of-pocket expenses by making a one-time or reoccurring online transfer from your HSA to your personal checking or savings account.
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 I use my HSA card for groceries?
No, you can't use your Flexible Spending Account (FSA) or Health Savings Account (HSA) for straight food purchases like meat, produce and dairy. But you can use them for some nutrition-related products and services. To review, tax-advantaged accounts have regulatory restrictions on eligible products and services.
Is it better to use HSA or save it?
It is never ideal to go into debt to cover your deductible and other out-of-pocket costs. If you have medical bills right now that you can't cover from your checking account (or by tapping a portion of your emergency savings), it is wise to use your HSA today to pay your outstanding medical bills.
What is a potential downside of HSA?
The main downside of an HSA is that you must have a high-deductible health insurance plan to get one. A health insurance deductible is the amount of money you must pay out of pocket each year before your insurance plan benefits begin.
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.
Does HSA lower my paycheck?
Did you know that setting aside funds for healthcare expenses can also help you lower your taxable income? That's exactly what a health savings account, or HSA, does. Think of an HSA as a special savings account just for medical expenses, but with added tax perks.
Does the IRS check HSA spending?
Is there an expense verification process like an FSA or HRA? Verification of expenses is not required for HSAs. However, total withdrawals from your HSA are reported to the IRS on Form 1099-SA.
Can I borrow from my HSA and pay it back?
No.
Why do companies push HSA?
Employers like offering HSAs because they can save everyone a lot of money. Most employers even offer an HSA contribution on your behalf in addition to reduced premiums to incentivize employees to switch.
What happens to my HSA if I never use it?
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.
What if I accidentally bought food on my HSA?
Yes, you read that correctly—even if you accidentally paid for a burger with your HSA debit card, you will have to report it on your annual income tax return and pay taxes on it. If you're under 65 and spend the money on unqualified purchases, you must also pay a 20% penalty on top of the income tax.
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.