Health savings accounts (HSAs) offer great tax benefits and flexibility for covering a variety of medical expenses, including those not typically covered by health insurance. For example, dental costs can add up quickly with procedures like root canals, fillings, or braces, which most health insurance plans don't cover unless it’s an emergency. HSA funds can be used to pay for many dental expenses, though there are some limitations that you should be aware of.
A financial advisor can help you determine whether an HSA, and other plans, supports your financial goals and needs.
Health Savings Account Basics
An HSA is a type of savings account that offers participants in high-deductible health plans (HDHPs) a way to set aside money on a tax-advantaged basis to cover medical expenses. Contributions made to an HSA are tax-deductible, meaning they reduce your taxable income. Plus, funds in the account can be invested and grow tax-free.
You can use your HSA funds for a wide variety of healthcare expenses, and as long as those withdrawals are made for qualified medical expenses, they are not subject to taxes. If you withdraw from your HSA for non-medical expenses before age 65, however, you may owe a penalty of 20% of the amount withdrawn in addition to any income tax.
The money in an HSA account rolls over year after year. There's no “use it or lose it” rule like you might find with a flexible spending account (FSA). So if you don't spend all the funds you put in your HSA this year, they will be available next year or at any time in the future. This feature makes an HSA a strategic tool for long-term healthcare savings.
Also, if you don't use all the funds for medical expenses during your working years, you can use the HSA to cover healthcare costs in retirement. Retirees can even tap their HSAs penalty-free for non-medical expenses, although non-medical withdrawals will be taxed.
To be eligible for an HSA, you must be enrolled in a high-deductible health plan, which is defined by the IRS each year. For 2024, the minimum deductible for an HDHP is $1,600 for individuals and $3,200 for families, with out-of-pocket maximum including annual deductible totaling $8,050 for individuals and $16,100 for families. People over 55 can also make catch-up contributions of an additional $1,000 per year.
Can You Use a Health Savings Account (HSA) for Dental Care?
Yes, you can use HSA funds for many dental care expenses, and you can even do this if your health insurance plan does not provide dental benefits. Only certain dental expenses are eligible, however. The IRS has specific guidelines concerning the dental services you can pay for with your HSA. Generally, dental treatments that are considered necessary for maintaining oral health qualify as HSA-eligible expenses.
This includes routine dental services such as exams, cleanings and fillings as well as more advanced procedures like root canals and extractions. Orthodontic treatments, such as braces, are also eligible if deemed medically necessary. Dentures, bridges and dental surgery are additional examples of qualifying dental expenses.
However, not all dental services are eligible. Cosmetic procedures, such as teeth whitening or veneers, are typically not considered qualified medical expenses by the IRS. These procedures, which are designed to enhance appearance rather than treat or prevent a dental condition, cannot be paid for using HSA funds.
HSA Qualified Expenses
An HSA offers a broad range of uses beyond dental care, and understanding what qualifies as a covered expense can help you make the most of your account. The IRS outlines a variety of medical and healthcare-related expenses that can be covered with HSA funds. Here are some common examples:
- Doctor's visits and consultations: HSA funds can be used to pay for the cost of visiting a physician or specialist, as well as any diagnostic tests or procedures prescribed by your doctor.
- Prescription medications: Prescription drugs, including those for chronic conditions or temporary treatments, are eligible for HSA reimbursement.
- Vision care: Eye exams, prescription glasses, contact lenses and corrective eye surgery, such as LASIK, are considered HSA-qualified expenses.
- Medical equipment and supplies: Items like crutches, blood pressure monitors, wheelchairs and hearing aids can be purchased with HSA funds.
- Mental health services: Therapy, counseling and other mental health treatments provided by a licensed professional are considered eligible expenses.
If you're unsure about whether a specific cost is eligible for payment with HSA funds, you can check with your HSA provider or consult IRS Publication 502 for a comprehensive list of qualified expenses.
Bottom Line
HSAs offer flexibility in paying for a wide range of medical and dental expenses, including routine dental care and medically necessary procedures. However, cosmetic dental treatments are generally not covered. By using your HSA wisely and sticking to eligible expenses, you can take full advantage of the tax benefits it provides. If you’re unsure whether a specific dental or medical expense qualifies, check IRS guidelines or consult with your HSA provider to avoid penalties.
Tips for Healthcare Costs
- Your healthcare costs will be considered in a comprehensive financial plan prepared by a financial advisor. Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now.
- Many people who retire are surprised by what their healthcare options could cost. Here's how much you should set aside to cover those expenses.
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