You can withdraw from your HSA at any time, but the tax treatment depends on what you spend the money on
Money in your HSA is yours to use. You can withdraw it whenever you want. The catch is that if you withdraw money and don't spend it on a may have access to medical expense, you'll owe income tax on that withdrawal plus a 20% penalty — unless you're over 65, disabled, or no longer covered by an HSA-may be able to access health plan.
The IRS maintains a specific list of what counts as a may have access to medical expense. Common ones include copays, deductibles, prescription drugs, dental work, vision care, and mental health treatment. Less obvious ones include hearing aids, crutches, and some over-the-counter medications (but only if you have a prescription). Cosmetic procedures, gym memberships, and vitamins don't count unless a doctor prescribes them for a specific medical condition.
If you're withdrawing for a may have access to expense, you pay no tax and no penalty. If you're withdrawing for anything else before age 65, you pay both. After 65, you can withdraw for any reason — you'll pay income tax on non-medical withdrawals, but the 20% penalty goes away.
Key Takeaways
- Withdrawals for may have access to medical expenses are tax-free and penalty-free at any age.
- Withdrawals for non-medical expenses before age 65 trigger both income tax and a 20% penalty on the amount withdrawn.
- After age 65, you can withdraw for any reason without the 20% penalty, though non-medical withdrawals are taxed as income.
- You can request a withdrawal by check, debit card, or electronic transfer, depending on your HSA provider.
- Keep receipts for all medical expenses you pay with HSA funds, because the IRS can audit your account and ask you to prove the expenses were may have access to.
How to request a withdrawal from your HSA
The mechanics depend on your HSA provider — the bank or financial institution that holds your account. Most offer at least two methods: a debit card linked to the account, or a check or electronic transfer you request online or by phone.
If your HSA comes with a debit card, you can swipe it at pharmacies, doctors' offices, and hospitals just like a regular card. Some providers also let you use the card at retailers that sell medical supplies. The transaction is recorded in your account, and you should keep the receipt.
If you don't have a debit card or prefer not to use it, log into your HSA provider's website or call them to request a check or bank transfer. The withdrawal usually posts within one to three business days. You'll then pay the provider or medical vendor yourself.
Some HSA providers charge a fee for withdrawals or transfers — typically $2 to $5 per transaction. Check your account agreement or call your provider to find out what fees apply.
What counts as a may have access to medical expense
The IRS publishes a list of may have access to medical expenses in Publication 969. The broadest categories are:
- Doctor visits, hospital stays, and surgery
- Prescription drugs and insulin
- Dental care, including cleanings, fillings, root canals, and orthodontia
- Vision care, including eye exams, glasses, and contact lenses
- Mental health and substance abuse treatment
- Medical equipment and supplies: crutches, wheelchairs, hearing aids, blood pressure monitors, glucose monitors, and bandages
- Certain over-the-counter medications if you have a prescription from a doctor
- Long-term care insurance premiums (with limits based on age)
- Medicare premiums and out-of-pocket costs if you're retired
Expenses that do not count include cosmetic procedures (unless medically necessary), gym memberships, general wellness programs, vitamins and supplements (unless prescribed for a specific condition), and most over-the-counter items without a prescription.
If you're unsure whether an expense qualifies, ask your provider or check IRS Publication 969 online. When in doubt, keep the receipt and the doctor's prescription or statement of medical necessity — the IRS can audit your HSA and ask you to prove expenses were may have access to.
Withdrawals after age 65
Once you turn 65, the 20% penalty on non-medical withdrawals disappears. You can withdraw money for any reason without penalty. However, non-medical withdrawals are still taxed as ordinary income.
This makes an HSA function like a traditional IRA after 65 — a tax-deferred savings account that you can tap for anything. Medical withdrawals remain tax-free and penalty-free at any age.
If you're on Medicare, you can still contribute to an HSA as long as you're covered by an HSA-may be able to access health plan. Once you enroll in Medicare Part A, you can no longer contribute, but you can continue to withdraw for may have access to medical expenses.
What happens if you withdraw for a non-may have access to expense
If you withdraw money before age 65 and spend it on something that doesn't count as a may have access to medical expense, you owe income tax on the amount withdrawn plus a 20% penalty. The penalty is calculated on the withdrawal amount itself, not on your total income.
For example, if you withdraw $1,000 for a non-may have access to expense, you owe income tax on $1,000 (at your marginal rate) plus $200 in penalty. If you're in the 22% tax bracket, your total cost is $220 in tax plus $200 in penalty — $420 out of the $1,000 withdrawn.
Your HSA provider will report the withdrawal to the IRS on Form 5498-SA. If the withdrawal was non-may have access to, you report it on your tax return and calculate the penalty yourself. The IRS doesn't automatically assess it, but if you're audited, they will.
There is no time limit on how long you can hold money in an HSA before withdrawing it. You can also withdraw money years after you spent it on a medical expense, as long as you keep proof of the expense and can show it was may have access to.
Reimbursing yourself from an HSA
You don't have to withdraw money from your HSA the same year you incur a medical expense. You can pay for a medical expense out of pocket, keep the receipt, and reimburse yourself from your HSA months or years later.
This strategy lets you leave money in your HSA to grow tax-free while you cover medical costs with other funds. As long as you have documentation of the expense and can prove it was may have access to, the IRS allows the reimbursement.
Keep receipts and medical statements in a folder or digital file. If you're audited, you'll need to show that the expense was real, that it was medically necessary, and that you didn't already deduct it on your taxes or claim it through insurance.
Frequently Asked Questions
Can I withdraw from my HSA to pay my health insurance premium?
No, not your regular health insurance premium. However, you can withdraw to pay Medicare premiums, COBRA premiums, and long-term care insurance premiums (within age-based limits). You can also withdraw to pay out-of-pocket costs after you're on Medicare.
What if I withdraw money and then find out the expense wasn't may have access to?
You owe income tax and the 20% penalty on that withdrawal (unless you're over 65). Report it on your tax return. If you discover the error before filing, you can try to redeposit the money, though some providers charge a fee and the IRS may not allow it depending on timing.
Do I have to report HSA withdrawals to the IRS every year?
Your HSA provider reports all withdrawals on Form 5498-SA, which goes to the IRS. You don't file a separate form, but if you took a non-may have access to withdrawal, you report the penalty on your tax return. Keep receipts for may have access to expenses in case of audit.
Can I withdraw from someone else's HSA?
No. An HSA is owned by the person whose name is on the account. Only that person can withdraw funds. After death, the account goes to the beneficiary named in the account agreement, but they cannot withdraw for their own expenses — only to pay the deceased's may have access to medical expenses or estate taxes.
What if my HSA provider goes out of business?
HSA funds are held in trust and are not at risk if the provider fails. Your money is protected. Contact your provider or the new custodian they transfer your account to in order to access your funds. You have the right to move your HSA to a different provider at any time.