In order for HSA assets to retain their tax-free status, they may only be withdrawn and used for certain expenses, including:

  • Actual medical expenses, including doctor visits, prescriptions, transportation to get medical care, and dental care
  • Long-term care insurance
  • Healthcare coverage when unemployed
  • Certain continuation-of-benefit healthcare coverage
  • Certain health insurance after age 65

Non- qualified uses of HSA assets are subject to taxation and an additional 20% penalty unless the HSA account beneficiary is age 65 or older, dies, or is disabled.

For more information, review IRS Publication 502.