Don’t Use Your HSA for Ineligible Expenses

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Be careful not to use your HSA for an expense other than qualified medical expenses. You can subject yourself to IRS penalties. Fortunately, you have until April 15th (tax day) of the following year to put funds back if you make a mistake.

Prior to age 65, if you use your money for non-qualified expenses, the IRS imposes a withdrawal penalty of 20 percent on the amount withdrawn.

To help you, below are some services and expenses that are not qualified:

• Aromatherapy
• Baby: bottles, cups, formula, oil & wipes
• Child care for a healthy child
• Cosmetics
• Deodorants
• Funeral expenses
• Health club membership dues
• Imported medications that aren't FDA-approved
• Late payment charges and missed appointment fees
• Mouthwash
• Petroleum jelly
• Shampoo and conditioner
• Spa salts
• Toiletries

For a complete list of qualified medical expenses see IRS Publication 502.

If you withdraw money from your HSA to pay for something, only to find out that it is not an HSA-qualified expense, you can replace the money in your account by the tax deadline of the following year without penalty or tax. Here's how to correct it: complete our HSA Mistaken Distribution Repayment Form and return it to us with the repayment funds.

The Mistaken Distribution Repayment Form can be found on our HSA webpage.