An HSA is only tax-free if you spend it on the right things. The IRS test is broad, but there are traps: insurance premiums, supplements and cosmetic items are not what they seem.
This guide sets out the test, a table of common items, the insurance rules and the penalty for non-qualified withdrawals. It follows IRS Publication 969 and Publication 502.
Qualified medical expenses for an HSA are those specified in the plan that would generally qualify for the medical and dental expenses deduction. IRS Publication 502 defines medical expenses as the costs of diagnosis, cure, mitigation, treatment, or prevention of disease and for the purpose of affecting any part or function of the body. If you take an HSA distribution for other reasons, the amount is subject to income tax and may be subject to an additional 20% tax. Pub. 969 says there is no additional tax on distributions made after the date you are disabled, reach age 65, or die (the income tax on a non-qualified withdrawal still applies).
| Expense | HSA treatment | Source |
|---|---|---|
| Over-the-counter medicine (whether or not prescribed) | Considered medical care and a covered expense | Pub. 969 |
| Menstrual care products | Treated as paid for medical care | Pub. 969 |
| Legal operations that are not cosmetic surgery | Can be included | Pub. 502 |
| Cosmetic surgery | Generally not included, unless it is necessary to improve a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease | Pub. 502 |
| Weight-loss program | Included if it is a treatment for a specific disease diagnosed by a physician (such as obesity, hypertension or heart disease) | Pub. 502 |
| Nutritional supplements, vitamins and herbal supplements | Not included unless recommended by a medical practitioner as treatment for a specific condition diagnosed by a physician | Pub. 502 |
You may not use HSA funds to pay for insurance, except for certain cases. Pub. 969 (2025) lists these exceptions: long-term care insurance (the premiums you can treat as qualified are subject to age-based limits); health care continuation coverage (such as COBRA); health care coverage while receiving unemployment compensation under federal or state law; and Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy such as Medigap).
Newer rule: under Public Law 119-21 (the 2025 tax act), expenses for a qualifying direct primary care service arrangement are not subject to the insurance restriction for months beginning after December 31, 2025. IRS Notice 2026-5 says such an arrangement must provide only primary care services for a fixed periodic fee, and that aggregate monthly fees above $150 (or $300 for an arrangement covering more than one individual) disqualify it; the limit is adjusted for inflation for taxable years after 2026. The notice also says fees paid by an employer are not expenses of the HSA beneficiary. This is newer than Pub. 969 (2025 edition), so read the notice before relying on it.
The expenses are those specified in the plan, so check your plan documents. Pub. 969 says you must keep records sufficient to show that distributions were exclusively for qualified medical expenses, that the expenses were not previously paid or reimbursed from another source, and that they were not taken as an itemized deduction in any year; receipts are the usual way to do that. Do not send these records with your return. For contribution limits see our HSA contribution limits guide, and for how an HSA compares with an FSA see our FSA vs HSA guide.
IRS Publication 969, IRS Publication 502: Medical and Dental Expenses, IRS Notice 2026-5.