Health Savings Accounts (HSAs) are one of the most versatile and tax-advantaged tools available for managing healthcare costs and planning for retirement. Whether you're looking to save on medical expenses, lowering your current year income tax liability, or optimizing your long-term financial goals, understanding how to leverage an HSA is key. Below, we’ll outline the eligible HSA expenses and explore how strategic planning can use these expenses to boost retirement savings while potentially lowering taxable income.
What Are Eligible HSA Expenses?
The IRS allows HSA funds to be used tax-free for qualified medical expenses. According to the IRS website they define HSA expenses as: "Qualified medical expenses are those expenses that would generally qualify for the medical and dental expenses deduction. These are explained in Pub. 502, Medical and Dental Expenses.
Amounts paid after 2019 for over-the-counter medicine (whether or not prescribed) and menstrual care products are considered medical care and are considered a covered expense. These expenses must primarily alleviate or prevent a physical or mental disability or illness. Here’s a breakdown of some common eligible expenses:
Medical Services and Treatments
Prescription Medications
Dental and Vision Care
Therapies and Mental Health
Preventative Care
Long-Term Care and Supportive Devices
Alternative Treatments (if prescribed)
Let's look at some specific examples from Publication 502 of the IRS code.
Acne laser treatment
Acupuncture
Ambulance fees and emergency care
Artificial limbs
Birth control pills, injections, and devices, such as IUDs
Blood pressure monitors
Body scans
Breast pumps and lactation supplies
Breast reconstruction surgery following cancer
Canes and walkers
Childbirth expenses, such as care from a midwife or obstetrician
Childbirth classes for the expectant mother
Chiropractic care
Contact lenses and saline solution
Crutches
Dental care, including cleanings, sealants, fluoride treatments, X-rays, fillings, braces, extractions, and dentures
Diabetes supplies, such as blood sugar test kits and insulin
Diabetes education, including nutrition counseling
Eye exams
Eye surgery, including laser surgery
Eyeglasses, including prescription and reading glasses, and prescription sunglasses
Blue-light-blocking glasses
First-aid kits
Flu shots
Guide dogs to assist with disabilities
Food, grooming, and veterinary care for guide dogs
Hearing aids and batteries
Hospital expenses for both inpatient and outpatient services
Infertility treatment, including in vitro fertilization; egg, sperm, and embryo storage; fertility monitors; and sperm washing
Egg donor expenses related to infertility treatment
Inpatient drug and alcohol treatment
Insulin
Lab fees
Long-term-care premiums, up to a qualifying amount based on your age
Medical alert bracelets
Medical records fees
Medicare premiums if you're 65 or older, excluding Medicare supplemental policies
Night guards to treat teeth grinding
Nursing care, whether provided in your home or a nursing home
Occupational therapy
Oxygen and oxygen equipment
Physical exams
Physical therapy
Prescription medications
Psychiatrist care
Psychologist care
Smoking-cessation programs and drugs, including nicotine patches and gums
Speech therapy
Surgery, excluding elective cosmetic surgery
Thermometers
Tubal ligation (female sterilization) and tubal ligation reversal
Ultrasounds
Vaccines
Vasectomy (male sterilization) and vasectomy reversal
Wheelchairs
X-rays
Additionally, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) changed to allow HSAs to be used for over-the-counter medicine (whether or not prescribed) and menstrual care products, provided they are paid after 2019.
Finally, suppose you have a medical diagnosis where a doctor confirms a product or service is necessary to treat that medical condition. In that case, there is a whole list of items that could qualify as an eligible HSA expense. Please talk to your Financial Advisor if you think this situation pertains to you.
It’s important to keep detailed records of expenses to ensure compliance and facilitate future strategic use, which we’ll discuss shortly.
HSA Strategy: Using Prior-Year Expenses to Boost Retirement Contributions
One of the lesser-known benefits of an HSA is the ability to reimburse yourself for qualified medical expenses incurred in prior years, provided those expenses were incurred after the HSA was established and you kept proper records. This feature opens the door for strategic tax planning.
The Scenario
Let’s say Emily has been diligently contributing to her HSA for several years and paying out of pocket medical expenses, allowing her HSA balance at Fidelity to grow tax-free while being invested in the four Dave Ramsey categories. Over the years, she’s accumulated $10,000 in unreimbursed medical expenses.
In 2025, Emily decides to reimburse herself from her HSA for these past expenses. She withdraws $10,000 tax-free from her HSA and uses the funds to make a $7,000 contribution to her IRA (the maximum allowed for her age and income) and the remaining $3,000 for her 401(k) at work. By doing this:
She reduces her taxable income in 2025 by $10,000, thanks to her IRA and 401(k) contributions.
Her retirement accounts grow tax-deferred (or tax-free, in the case of a Roth IRA).
This strategy not only lowers her immediate tax liability but also bolsters her retirement savings using pre-tax dollars.
Incorporating Dave Ramsey’s Principles
Dave Ramsey emphasizes the importance of intentional financial planning, particularly in avoiding debt and building wealth through consistent savings. HSAs align well with his principles:
Budget for Healthcare Costs: Just as Ramsey encourages families to budget for monthly expenses, planning for healthcare costs ensures that HSA funds are used effectively without dipping into debt.
Debt-Free Living: By paying for medical expenses out of pocket when possible, you avoid depleting your HSA, allowing it to grow as a debt-free source of financial security.
Baby Step 4: Invest 15% for Retirement: Using your HSA strategically, as Emily did, can help you meet Ramsey’s goal of consistently investing for retirement while enjoying immediate tax savings.
Final Thoughts
An HSA is more than just a tool for covering today’s medical expenses—it’s a powerful vehicle for long-term financial success. By understanding eligible expenses and leveraging the flexibility of reimbursement, you can align your HSA strategy with larger financial goals like retirement planning and tax efficiency.
At Whitaker-Myers Wealth Managers, we help clients incorporate HSAs into a holistic financial plan, maximizing their benefits while staying true to principles like those of Dave Ramsey: living intentionally, saving consistently, and building a legacy of financial freedom.
Ready to take control of your finances and make the most of your HSA? Contact us at Whitaker-Myers Wealth Managers to develop a strategy tailored to your unique financial goals.