How to Use HSA for Living Expenses

Accessing your HSA funds is as easy as using an ATM.
Accessing your HSA funds is as easy as using an ATM. (Image: atm image by Franc Podgoršek from

You can tap funds from your Health Savings Account (HSA) for living expenses as easily as you use a debit card. However, because you or your former employer funded the HSA with before-tax dollars, the Internal Revenue Service (IRS) will require that you pay income taxes, along with a 10 percent penalty, on any distribution that is not used for a qualified medical expense.

Even with the taxes and penalties, using funds from your HSA account might be a less expensive option than going into debt using a credit card. Taxpayers over 65 or who are fully disabled do not have to pay the 10 percent penalty.

Contact your HSA provider and ask for a debit card for your account if you do not already have one. Your HSA debit card should look just like a regular bank debit card in every respect. You should also receive, or have the option to create, a Personal Identification Number, or PIN.

Liquidate any non-cash investments in your HSA so that you can easily access the funds.

Use your HSA debit card just as you would a regular bank debit card, either with the PIN or with your signature. You will not have to pay any penalties or taxes until you file your tax return.

Keep all the receipts for your qualified medical expense distributions, since your HSA provider will not differentiate between qualified and non-qualified distributions. You will not have to pay taxes or penalties on these distributions, but you must be able to document them on IRS Form 8889. You do not need to keep receipts for your non-qualified distributions.

Keep the receipts for your qualified medical expenses.
Keep the receipts for your qualified medical expenses. (Image: expensive medicines image by Alex from

Request a copy of your Form 1099-SA from your HSA provider if you do not receive one by Jan. 31 of the following year. The form will show your total distributions, some of which might be qualified medical expenses.

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