You can withdraw from your HSA anytime, but the tax treatment depends on what you spend the money on

A Health Savings Account (HSA) is yours to use. You can withdraw money 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, in which case you owe the income tax but not the penalty.

The IRS maintains a specific list of what counts as a may have access to medical expense. Common ones include doctor visits, prescriptions, dental work, vision care, and medical equipment. Less obvious ones include acupuncture, hearing aids, and some over-the-counter items (though rules on those changed in 2020). Expenses that don't count include cosmetic surgery, gym memberships, and most vitamins.

You don't have to spend the money in the same year you withdraw it. You can withdraw $500 today for a doctor visit from three years ago, as long as you have documentation that the expense happened and that you didn't already pay for it with another tax-free account.

Key Takeaways

  • Withdrawals for may have access to medical expenses are tax-free and penalty-free at any age.
  • Withdrawals for non-medical expenses trigger income tax plus a 20% penalty before age 65.
  • You can withdraw for medical expenses from past years as long as you have receipts and didn't already claim them elsewhere.
  • After age 65, you can withdraw for any reason and only owe income tax, not the 20% penalty.
  • Your HSA provider can tell you which specific expenses they will and won't reimburse.

How to actually withdraw the money

The mechanics depend on your HSA provider. Most offer a debit card linked to the account, which you can use at pharmacies, doctor offices, and medical suppliers just like a regular bank card. Some providers also let you write checks against the account.

If your provider doesn't offer a debit card, you can request a check or electronic transfer to your personal bank account. Some people do this intentionally — they pay for medical expenses out of pocket with their own money, keep the receipts, and then reimburse themselves from the HSA later. This approach lets the HSA balance grow and earn interest while you use other money for current expenses.

You don't have to submit receipts at the time of withdrawal. The IRS requires you to keep them for your records in case of an audit, but your HSA provider typically doesn't ask to see them upfront. That said, some providers do ask for documentation before they process a withdrawal, so check your account terms.

What counts as a may have access to medical expense

The IRS publishes a list called Publication 502, which runs dozens of pages. Here are the categories that cover most withdrawals: doctor and dentist visits, hospital care, prescription drugs, insulin, medical equipment (crutches, wheelchairs, hearing aids), vision care (glasses, contacts, exams), mental health treatment, and physical therapy.

Some expenses surprise people. Acupuncture, chiropractic care, and certain fertility treatments count. Smoking cessation programs count. Long-term care insurance premiums count, with limits. Over-the-counter medications and supplies now count if you have a prescription or a doctor's note saying you need them — this changed in 2020, and many people don't know about it.

Expenses that definitely don't count: cosmetic procedures (unless medically necessary, like reconstructive surgery after an accident), gym memberships and fitness equipment, most vitamins and supplements, toothpaste, cosmetics, and general wellness products. If you're unsure about a specific item, your HSA provider's website usually has a searchable database, or you can call and ask.

Withdrawals after age 65

Once you turn 65, the rules change in your favor. You can withdraw money for any reason — medical or not — and you only owe income tax on the non-medical portion. You don't owe the 20% penalty anymore. This makes an HSA function like a traditional retirement account after 65, which is why some people treat it as a long-term savings vehicle rather than spending it down each year.

If you withdraw $5,000 after age 65 and $3,000 of it is for a may have access to medical expense, you owe income tax only on the $2,000. You don't owe the penalty on either amount.

Keeping records and avoiding problems

The IRS doesn't require you to submit receipts when you withdraw, but you must keep them. "Keep them" means store the actual receipt or a clear photo of it, along with a record of what the expense was for and when it occurred. If the IRS audits your HSA, they will ask to see these documents.

A common mistake is withdrawing money for an expense you already paid with insurance or another account. For example, if your insurance covered your doctor visit and you also withdrew from your HSA for the same visit, that withdrawal is taxable and penalized. The rule is that you can't use two tax-advantaged accounts for the same expense.

Another mistake is withdrawing for something that isn't actually a may have access to expense and not realizing it until tax time. If you're uncertain, ask your HSA provider before you withdraw. They can usually tell you in writing whether a specific expense qualifies.

Withdrawals if you change health insurance

Your HSA stays yours even if you leave your high-deductible health plan or change employers. You can keep withdrawing from it for may have access to medical expenses for the rest of your life. You don't have to spend it down by a certain date, and you don't lose it if you switch to a different type of insurance.

If you switch to a non-high-deductible plan, you can no longer contribute new money to the HSA, but you can still withdraw from the balance you already have. This is one reason HSAs are valuable — the money doesn't expire.

Frequently Asked Questions

What happens if I withdraw for something that isn't a may have access to expense?

You owe income tax on that amount plus a 20% penalty, unless you're over 65. So a $1,000 withdrawal for a non-may have access to expense might cost you $220 to $320 in taxes and penalties, depending on your tax bracket. Keep the receipt for the actual expense in case you need to prove it later.

Can I withdraw money I contributed in a previous year?

Yes. You can withdraw for medical expenses from any year in the past, as long as you have documentation and didn't already pay for that expense with another tax-free account. Many people use this to reimburse themselves years later.

Do I have to report HSA withdrawals on my tax return?

Your HSA provider sends you a Form 1099-SA each year showing total withdrawals. You report this on your tax return. If all withdrawals were for may have access to expenses, you don't owe additional tax. If some were not, you report the non-may have access to amount and the penalty.

What if I can't find a receipt for an old medical expense?

Contact the provider — your doctor's office, pharmacy, or hospital — and ask for a duplicate receipt or a statement showing the date and amount of the expense. Most will provide this. If you absolutely cannot get documentation, the IRS may deny the withdrawal as a deduction if audited, so it's worth the effort to track it down.

Can someone else withdraw from my HSA?

Only you can withdraw from your HSA, unless you've given someone power of attorney. A spouse cannot withdraw from your HSA without your permission, even if you're married and file taxes jointly.