Qualified medical expenses are generally unreimbursed medical and dental expenses that would otherwise be deductible as an itemized deduction on Schedule A (Form 1040). These expenses can be paid or reimbursed tax-free from your Health Savings Account (HSA), provided they were incurred after the HSA was established.
A key rule to remember: you can't use the same medical expense for more than one tax benefit. If you use an expense to justify a tax-free HSA distribution, you can't also claim that same expense as a medical deduction on Schedule A.
Can HSA Funds Be Used to Pay Insurance Premiums?
Usually, insurance premiums are not considered qualified medical expenses for HSA purposes. However, there are a few important exceptions.
You can generally use HSA funds tax-free to pay for:
- Qualified long-term care insurance premiums
- Health care continuation coverage, such as COBRA
- Health insurance coverage while receiving federal or state unemployment compensation
- Medicare and other health care coverage if you're age 65 or older (excluding premiums for Medicare supplemental policies, such as Medigap).
What Should Be Included as Unreimbursed Qualified Medical Expenses?
When reporting unreimbursed qualified medical expenses for HSA purposes, include only HSA distributions that were used to pay or reimburse qualified medical expenses incurred after your HSA was opened.
Do not include:
- Distributions related to excess HSA contributions that were withdrawn after the tax return due date
- Expenses that were reimbursed by insurance or another source
- Expenses already used to claim another tax benefit
Whose Medical Expenses Can Be Paid From an HSA?
You can generally use HSA distributions tax-free for qualified medical expenses incurred by:
- Yourself
- Your spouse
- Dependents claimed on your tax return
You may also be able to include expenses for someone you could have claimed as a dependent except that:
- They filed a joint tax return.
- Their income exceeded the dependency income limit.
- You (or your spouse, if filing jointly) could be claimed as a dependent on someone else's tax return.
Important Reminder
Any amount treated as a qualified medical expense on Form 8889 (Health Savings Accounts) cannot also be claimed as a medical expense deduction on Schedule A. Using the same expense twice is not allowed and may result in adjustments to your return.
Keeping receipts and records of your HSA distributions and medical expenses can make tax filing much easier if the IRS ever asks for documentation.