Health Savings Accounts (HSAs) use the IRS §213(d) medical expense definition as the baseline for what qualifies.
However, HSAs have unique tax, eligibility, and timing rules that change how and when 213(d) expenses can be reimbursed.
Refer to IRC §213(d) Medical Expenses page for more detailed information on allowable expenses.
Expenses Must Be Incurred After HSA Eligibility Begins
An expense only qualifies if it was incurred after the participant became HSA-eligible. Eligibility begins when all criteria are met:
- Enrolled in a qualified HDHP
- No disqualifying coverage (must only be covered by HDHP)
- Not enrolled in Medicare
- Not claimed as someone else’s tax dependent
Expenses incurred before eligibility cannot be reimbursed.
Note: Effective January 1, 2026
Individuals enrolled in Bronze-tier on-Exchange individual plans or Catastrophic on-Exchange individual plans will be eligible to contribute to an HSA even if these plans are not HDHPs, provided they have no other disqualifying coverage. This is only for Individual and Family Plans on the Exchange. Bronze group health plans do not qualify for HSAs, unless they are considered qualified HDHPs.
HSAs Do Not Require Substantiation
Unlike HRAs/FSAs, the individual is responsible for ensuring expenses are qualified.
Employers and administrators do not validate receipts.
- Records must be kept for tax purposes
- IRS may request proof during an audit
Non-Qualified Expenses Trigger Taxes & Penalties
If an HSA distribution is used for non-qualified expenses:
- Ordinary income tax applies
- Additional 20% penalty applies (unless age 65+, disabled, or deceased)
Premium Rule Exceptions for HSAs
HSAs generally cannot pay health insurance premiums, except for:
- COBRA premiums
- Medicare premiums (A, B, D, MA) when HSA eligibility ends
- Long Term Care (LTC) premiums (within IRS age-based caps)
Individual market premiums do not qualify unless they fall into the exceptions above.
Age 26 Rule
HSAs may reimburse qualified medical expenses for a child who is under age 27 at the end of the tax year, even if that child does not meet the IRS definition of a tax dependent.
This provision is unique to HSAs. It does not apply to HRAs, ICHRAs, or FSAs, all of which require the individual to be an IRS tax dependent in order for expenses to qualify.
For questions about how this rule applies in individual tax situations, participants should consult a tax advisor.
Post-Deductible Rule (Important for Plans That Combine HSA + Other Accounts)
If paired with an HRA or FSA, those accounts must be:
- Limited Purpose (dental/vision only), or
- Post-deductible
…until the HDHP deductible is met.
Timing of Reimbursement
HSAs may reimburse expenses:
- In the same year they occur, or
- Years later, provided the HSA was open at the time the expense was incurred. This is called the “shoebox” rule.
This makes HSAs unique among all account types.