You might know that a growing number of Americans are becoming eligible for health savings accounts, which allows them to set aside money for qualifying medical expenses, tax-free.
But you might not know exactly which expenses an HSA can or can’t cover.
In general, an HSA can pay for an expense if it involves diagnosing, curing, treating, or preventing a disease or something that affects a body part or function.
A program to help quit smoking? That’s covered.
Nicotine gum or patches that are sold over the counter? Not covered.
An HSA can’t be used to cover most over-the-counter drugs, unless the drugs are prescribed by a doctor. Yet there’s an exception for home pregnancy tests and contact lens solution, even though you can buy them without a prescription.
Here’s a sample of what you can and can’t pay for with HSA money:
People qualify to have HSAs if they meet certain conditions—the main ones being that they have a high-deductible health plan and no other health coverage. For 2015, a high-deductible plan means one with an annual deductible of at least $1,300 for individuals that also puts the individual on the hook for paying up to $6,450 in deductibles and out-of-pocket expenses in a year.
Individuals can contribute up to $3,400 to an HSA for 2017, or $6,750 for those with family coverage.