I had an HSA last year. This year I have health insurance through ACA. Does the HSA money have to be used exclusively for medical expenses?

  • 5
    What were you hoping to use it for?
    – RonJohn
    Commented Jan 23, 2020 at 15:46
  • If a doctor prescribes a hot tub to help your joints then that would qualify.
    – MonkeyZeus
    Commented Jan 23, 2020 at 20:48
  • 2
    Side tangent: if you can afford to do so, keep the funds in the account until you have something you can use it on. Surely there are some gaps between ACA and what is HSA eligible...
    – corsiKa
    Commented Jan 24, 2020 at 19:33
  • IRS guidance here. I believe you can use HSA funds to reimburse yourself for the premiums paid for that ACA plan, as well as for deductibles/co-pays/prescriptions & over-the counter medication not covered by your plan, plus things like band-aids and even contraceptives.
    – WBT
    Commented Jan 27, 2020 at 14:43

4 Answers 4


I just want to point out that your question implies a misunderstanding, even though you didn't explicitly mention it:

I had an HSA last year. This year I have health insurance through ACA.

The fact that you have insurance through the ACA may not be relevant. There are many plans in the ACA that are HSA compatible. But even if you don't currently have a compatible HSA plan, that just means you can't contribute any more funds to your HSA account, but you can still spend the funds already in your HSA, and regardless of your insurance plan (or even if you're uninsured) you will almost always have some eligible medical expenses that you could use the funds for.

To answer your specific question, no, you don't have to use the funds for eligible medical expenses, but if you don't you'll have to pay tax + fees on the withdrawals. (Unless you're over 65 in which case you'll pay tax, but no fees.)

  • It might be worth highlighting that the answer to this specific question is yes, possibly contrasted against an FSA.
    – Upper_Case
    Commented Jan 24, 2020 at 18:36
  • 1
    @Upper_Case - good idea, though, technically the answer is "No", not yes. ;) I updated my answer to clarify.
    – TTT
    Commented Jan 24, 2020 at 19:17

If you want the tax benefits of the funds, yes, they must be used for qualified medical expenses as defined by the IRS.

You can withdraw funds whenever you want, for any reason, but if they are not spent on qualified medical expenses, then there will be tax implications. If you are under 65 years old, you will pay income tax plus a penalty on any unqualified expenses. But if you are at least 65, you will pay only income tax, without a penalty.


Yes, it must be for a qualified medical expense.

Qualified medical expenses are those expenses that generally would qualify for the medical and dental expenses deduction. These are explained in Pub. 502, Medical and Dental Expenses.

Also, non-prescription medicines (other than insulin) aren’t considered qualified medical expenses for HSA purposes. A medicine or drug will be a qualified medical expense for HSA purposes only if the medicine or drug:

  1. Requires a prescription,
  2. Is available without a prescription (an over-the-counter medicine or drug) and you get a prescription for it, or
  3. Is insulin.

For HSA purposes, expenses incurred before you establish your HSA aren’t qualified medical expenses. State law determines when an HSA is established. An HSA that is funded by amounts rolled over from an Archer MSA or another HSA is established on the date the prior account was established.

If, under the last-month rule, you are considered to be an eligible individual for the entire year for determining the contribution amount, only those expenses incurred after you actually establish your HSA are qualified medical expenses.

Qualified medical expenses are those incurred by the following persons.

  1. You and your spouse.
  2. All dependents you claim on your tax return.
  3. Any person you could have claimed as a dependent on your return except that: a.

    • The person filed a joint return,

    • The person had gross income of $4,150 or more, or

    • You, or your spouse if filing jointly, could be claimed as a dependent on someone else’s 2018 return.


  • Lots of little gotchas with HSAs. Make sure to check the guidance (can be found via Google) on exactly what's covered and what's not. You'll find that you can use for some common items that are not prescriptions, then surprise you get a prescription that you reasonably expect to be allowed, but is in fact not (and then you end up repaying it with penalty in your taxes). Commented Jan 23, 2020 at 17:11

Contrary to what some of the other answers here have said, it is possible to spend your HSA funds on non-medical expenses without penalty, but only if you hold them until after the retirement age of 65:

There is no penalty for non-health care withdraws in retirement though. "It works just like an IRA once you hit (age) 65," Conroy says. At that point, money can be taken from an HSA for any purpose with only income tax due on that amount. That's the same as how withdrawals from traditional IRAs are handled after age 59 1/2.

If your current healthcare plan is comprehensive, you can just sit on your HSA (or even invest it) until you retire. Then, you can spend it on anything you'd like, without tax penalty.

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