Understanding Health Savings Accounts: Can You Use Them for Gym Memberships?

Health savings accounts (HSAs) enable individuals enrolled in high-deductible health plans to set aside pre-tax money for medical expenses. While some might think about using HSA funds for gym memberships, it’s important to note that only qualified medical expenses are covered. Here’s what you should know.

A financial advisor can assist you in integrating HSA contributions into your tax planning, medical expense budgeting, and long-term investment strategy.

Key Points of Health Savings Accounts

An HSA is a savings account designed with tax advantages to help individuals manage medical expenses. It is exclusively available to those with a high-deductible health plan (HDHP).

One of the greatest advantages of an HSA is its triple tax benefit. Contributions are made using pre-tax dollars, reducing your taxable income. Additionally, the account grows tax-free, and withdrawals for qualified medical expenses are also tax-free.

Unlike flexible spending accounts (FSAs), funds in an HSA can roll over from year to year. This feature allows you to build your savings over time, which can be beneficial for healthcare costs during retirement.

In 2024, the IRS has set the contribution limits for HSAs at $4,150 for individuals and $8,300 for families. Additionally, those aged 55 and over can make an extra $1,000 catch-up contribution. Some HSA providers may allow investments in stocks, bonds, or mutual funds, potentially enhancing your savings over time.

Understanding HSA Qualified Expenses

HSAs can cover a variety of medical expenses, but not all health-related purchases qualify. To avoid taxes or penalties, an expense must meet the IRS definition of a qualified medical expense. Some common qualified expenses include:

• Doctor visits and hospital stays: Payments for physician visits, hospital services, and medical treatments, including co-pays and certain surgeries, are covered by HSAs.
• Prescription medications: HSA funds can be used for prescribed medications and over-the-counter drugs if recommended by a healthcare provider.
• Dental and vision care: Dental cleanings, orthodontic treatments, eye exams, and corrective eyewear like glasses or contact lenses fall under qualified expenses.
• Medical equipment: Assistive devices such as crutches, wheelchairs, and blood glucose monitors are also eligible for HSA funds.

While HSAs offer flexible spending options, items like vitamins or elective cosmetic procedures generally do not qualify as medical expenses. It’s crucial to confirm with your HSA provider and review withdrawal guidelines, as using funds for non-qualified expenses can lead to taxes and penalties.

Gym Memberships and HSA Coverage

Generally, gym memberships do not qualify as medical expenses according to IRS guidelines. Although physical fitness is vital, these memberships are usually categorized as personal or recreational expenses, thereby making use of HSA funds for them subject to taxes and penalties.

However, there are exceptions. If a physician prescribes a gym membership as part of a recovery plan for a specific medical condition—such as obesity, diabetes, or following surgery—it may qualify as a medical expense. Always consult your HSA provider and obtain proper documentation from your doctor to adhere to IRS requirements.

Your HSA can also cover other health-related expenses like physical therapy, chiropractic care, or doctor-recommended weight-loss programs, as these are more likely to satisfy the medical necessity criteria.

Conclusion

HSAs are valuable for managing healthcare expenses, but gym memberships generally do not qualify as medical costs. Understanding the IRS definition of a qualified medical expense is essential to avoid taxes and penalties. For wellness with HSA funds, consider covering qualified expenses such as doctor visits, prescription medications, or specific wellness programs.

Helpful HSA Tips

• Significant health expenses can quickly deplete your savings. A financial advisor can help create a plan to save for retirement and cover health expenses. Finding one is simple; SmartAsset’s free tool connects you with up to three vetted advisors in your area, allowing a free introductory call to find a good fit for your needs.
• Although HSAs are not specifically for retirement savings, they can help supplement your nest egg. Since HSA funds roll over each year, if you remain healthy in retirement, you can use these funds for day-to-day living expenses or other costs, though income tax will apply to those withdrawals.

Photo credit: ©iStock.com/Drazen Zigic, ©iStock.com/Elena Katkova

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