HSAs in every budget: A guide for spenders

5 minute read

This is the first article in our series, HSAs in every budget. Stay tuned for other articles about saving your HSA and investing potential with funds in your HSA.

Health Savings Accounts (HSAs) have been rising in popularity over the last several years,¹ thanks to their flexibility and benefits. Unlike a Flexible Spending Account (FSA), which needs to be used during the plan year, HSAs are able to be used whether you need to pay for your eligible health needs today, you’d like to save for later, or you want to invest funds once your balance reaches a certain threshold.

*Your HSA plan may offer investment options once your balance reaches a certain threshold. All investing involves risks of fluctuating prices and the uncertainties of rates of return and yield inherent in investing. All security transactions involve substantial risk of loss.

 

Basic benefits of HSA

HSAs are specialized accounts that pair with High Deductible Health Plans (HDHPs), a type of medical insurance that typically offers lower monthly premiums in exchange for a higher out-of-pocket deductible.

To help mitigate the out-of-pocket costs, the federal government allows those enrolled in an HDHP to contribute pre-tax money into an HSA, which can then be used toward eligible medical expenses such as your out-of-pocket deductible. The IRS places limits on how much you can set aside each year, but there is no balance limit, and your HSA is yours forever as long as there is money in the account — even if you change jobs.

You'll often hear that HSAs are triple tax-advantaged. That's because:

  1. You don’t pay taxes on the money when it’s contributed via payroll deduction.
  2. You don’t pay taxes on the money you earn in the account (from interest or investment growth).
  3. You don’t pay taxes on the money you withdraw (as long as it’s used for eligible health expenses). If money is used for non-eligible expenses, you will be taxed and also incur a penalty.

HSAs are fantastically flexible. You can add money straight from your paycheck before it is taxed. Each “pre-tax contribution” lowers the income amount the IRS can tax at the end of year — so you have the potential to save money during tax season. The more you contribute to your HSA (up to the annual maximum), the more tax savings you may see. Plus, as part of your job benefits, your employer may even contribute to your HSA as well.

It's important to keep in mind that the amount saved in taxes will vary depending on the amount set aside in the account, annual earnings, whether or not Social Security taxes are paid, the number of exemptions and deductions claimed, tax bracket and state and local tax regulations.

Spending your HSA today

While the “savings” in Health Savings Account may suggest otherwise, HSAs are great for health spending because every dollar that comes out is tax-free. But there is the catch: the money must be spent on eligible health-related expenses.

The good news is, HSA-eligible expenses are not limited to medical bills or items purchased directly from your doctor. You may be surprised to hear that many eligible items can be found in your local grocery store or pharmacy.

So if you find yourself pinching pennies when shopping for essentials, double-check your items for HSA eligibility. We’ve compiled a list* of what we found the most surprising:

SkincareFeminine and MotherhoodHigh-techBody
  • Sunscreen with SPF 30+
  • Lip balm with SPF
  • Acne treatments
  • Medicated cleanser for face and body
  • Medicated face and hand creams
  • Anti-itch/bug bite ointments and treatments
  • Hand sanitizer
  • Diaper cream
  • Breast pumps
  • Breast milk storage
  • Post-partum products
  • Breastfeeding relief products
  • Family-planning items
  • Feminine hygiene products, including period-safe undergarments
  • Menstrual relief medicine and products
  • Smart scales that do full-body analysis
  • Migraine relief masks
  • Massage guns
  • Shiatsu massage rollers
  • Rechargeable, on-the-go heat and ice patches
  • Rings that track body metrics and sleep patterns
  • Bandages and first aid kits
  • Compression socks and sleeves
  • Contact solution
  • Ear and eye drops
  • Foot care, including blister treatment and moleskin
  • Lumbar support
  • Elbow, knee and back braces
  • Epsom salt
  • Heat pads/patches

 

*Not all products within these categories are HSA-eligible, and products and results may vary. Be sure to research which products/brands are eligible before using HSA funds to avoid tax penalties.

Wallet with money icon

An important rule about HSA spending

The most important rule (besides making sure you’re using your HSA money on eligible health expenses) is to keep your receipts.

When using your HSA money, you need to stay organized. Keep a folder at home where you can put paper receipts after making a purchase. If you shop online, be sure to save a copy of the itemized order confirmation in a file folder.

In some cases, you may want to reimburse yourself for eligible expenses you purchased with other funds. In this case, take extra care to match the itemized receipt with the cash withdrawal record.

Why is record keeping so important with HSAs? You don’t need to submit your receipts every year (like you do for FSAs), but if you ever undergo an audit from the IRS, you will need to produce thorough HSA records. Any HSA expenses that do not have receipts will be taxed as regular income (and could also come with penalties).

Everyday flexibility of HSAs

HSAs are great tools that allow HDHP users to contribute, grow, and withdraw pre-tax and tax-free dollars for their health-related costs. There are no limits around age, income level or the amount you can withdraw each year, as long as you have money in your account. Remember that the IRS sets an annual contribution limit however, so what you can add to your account must be within that limit.

If you want to use your HSA to buy eligible expenses, like bandages, sunscreen and ointments — you can. You can use your HSA to save money to be used for eligible expenses related to a planned pregnancy, or for emergency room trip for your kid who hurts their arm while learning to skateboard.

If you find an old receipt or forget to reimburse yourself right away, don’t fret. HSAs do not have a time restriction on reimbursements. As long as they are being used for qualified expenses or purchases, you can withdraw or use funds from your HSA to help you stay on top of your health.


Log in to your Voya account to review your contributions and familiarize yourself with HSA-eligible items and brands.

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1 Devenir Newsroom. “HSA Assets Hit $100 Billion Milestone”

2 Based on results of a Voya Financial Consumer Insights & Research survey conducted with Morning Consult between March 9-15, 2023, among n=500 working Americans age 18+ who have both an employer-sponsored retirement plan and a medical/health plan, featuring n=188 health savings account owners.

This material is not legal advice and is provided for informational purposes only. Neither Voya® nor its affiliated companies or representatives provide tax or legal advice. Please consult a tax or legal professional regarding your specific circumstances.

Health Savings Accounts offered by Voya Benefits Company, LLC (in New York, doing business as Voya BC, LLC). Custodial services provided by Voya Institutional Trust Company.

This highlights some of the benefits of a Health Savings Account. If there is a discrepancy between this material and the plan documents, the plan documents will govern. Subject to any applicable agreements, Voya and its subcontractors reserve the right to amend or modify the services at any time.

The amount saved in taxes will vary depending on the amount set aside in the account, annual earnings, whether or not Social Security taxes are paid, the number of exemptions and deductions claimed, tax bracket and state and local tax regulations. Check with a tax advisor for information on whether your participation will affect tax savings. None of the information provided should be considered tax or legal advice.

Investments are not FDIC Insured, are not guaranteed by Voya Benefits Company, LLC (in New York, doing business as Voya BC, LLC), and may lose value. All investing involves risks of fluctuating prices and the uncertainties of return and yield inherent in investing. All security transactions involve substantial risk of loss.

 

This information is provided by Voya for your education only. Neither Voya nor its representatives offer tax or legal advice. Please consult your tax or legal advisor before making a tax-related investment/insurance decision.

 

 

Products and services offered through the Voya® family of companies.

 

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