Yes, Funds you withdraw from your HSA are tax-free when used to pay for qualified medical expenses as described in Section 213(d) of the Internal Revenue Service Tax Code. The expenses must be primarily to alleviate or prevent a physical or mental defect or illness, including dental and vision. A list of these expenses is available on the IRS Web site, www.irs.gov in IRS Publication 502, “Medical and Dental Expenses.”
Any funds you withdraw for non-qualified medical expenses will be taxed at your income tax rate plus 20% tax penalty if you’re under 65.
The following partial list provides examples of eligible and ineligible medical expenses. This list is not all-inclusive. Remember, the IRS may modify its list of eligible expenses from time to time. As always, consult your tax advisor should you require specific tax advice.
- Annual Physical Examination
- Artificial Limb
- Artificial Teeth