What clients miss about HSAs — and how advisors can help

Health savings accounts cover a broad range of medical expenses, but the boundaries of what those tax-advantaged dollars can be spent on are not always clear. While copays, deductibles and dental work are commonly known eligible expenses, advisors say some unexpected costs, including chiropractic care, physical therapy and mental health care, often qualify. 

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HSAs are still relatively new, having been established in 2004. Paired with a high deductible health plan (HDHP), which can be attractive to healthy people who use health care services infrequently, the accounts offer a triple tax advantage for what the IRS deems qualified medical expenses, including medical, dental, vision and prescription costs. From 2004 to 2022, HSA contributions totaled $337.4 billion, according to recent congressional research. 

READ MORE: Why some advisors prefer HSAs over IRAs for retirement savings

But the guidelines around what an HSA covers can be blurry for clients. The IRS’ long list of eligible items and services goes far beyond what most people assume, said Hardik Patel, founder and financial advisor at Santa Rosa, California-based Trusted Path Wealth Management. 

Advisors who walk clients through that list page by page tend to uncover between $500 to $2,000 per year in expenses that the client previously paid out of pocket with after-tax dollars, Patel said. 

While an HSA won’t cover gym or yoga studio memberships purchased purely for fitness or cosmetic reasons, those expenses may qualify if a doctor prescribes them to treat diagnosed medical conditions. The distinction matters for compliance, Patel said. 

READ MORE: 5 ways advisors can get more out of HSAs

The most important consideration is that HSAs are not a wellness fund, said Jeff Judge, financial planner at Forest Hill, Maryland-based Chesapeake Financial Planners. Cosmetic procedures are almost always denied on audit, he said, and the account holder faces a penalty in addition to the full amount being treated as taxable income.

However, if a client needs Botox to correct a deformity or to treat a documented medical condition, funds from an HSA can be used. 

“Advisors who sit down with a client’s medical history and map it against the IRS-eligible services list often find ways to redirect hundreds of dollars annually into the HSA,” Patel said. “Not as a workaround, but as a legitimate alignment between what clients are already spending and what the account allows.”

Clients can use HSAs as a retirement vehicle if they can afford to pay medical expenses out of pocket — but that requires understanding which expenses qualify and being intentional about when to reimburse yourself, Patel said. 

“That’s where discipline matters,” Patel said. “Clients who invest in the HSA balance can end up with a triple-tax-advantaged account that compounds over decades.”

At the end of 2025,  HSA investment assets climbed to nearly $85 billion, which was up 33% from a year earlier. About 4.2 million accounts, or about 10% of all HSAs, held invested dollars, up 22% year-over-year.

READ MORE: Vast majority of HSA savers skip the investing option

Surprise services

Oura rings, menstrual products, massage therapy and hot or cold packs can all be HSA eligible, said Sam Mockford, associate wealth advisor at San Francisco-based Citrine Capital — a fact that can surprise both advisors and clients. 

Other often overlooked but potentially covered expenses include some skin-care and makeup products that contain SPF, including certain lip balms, facial moisturizers and foundation, Mockford said. And, like fitness memberships, hardware such as humidifiers or air purifiers may be covered by an HSA if a doctor provides a letter of medical necessity. 

While HSAs can cover the unexpected, it’s crucial to note that the boundary is medical necessity, not medical-adjacent expenses, said Judge. 

“Therapy and counseling, acupuncture and a slice of long-term care premiums, on a sliding scale by age. Even home modifications, like a ramp, if medically necessary,” Judge said. “The real boundary is the test itself. Not ‘Is this health related?’ but ‘Is this primarily for the diagnosis, treatment, cure, mitigation or prevention of disease?'”

The most important advice he gives clients is to document their medical purchases and to save every receipt, Judge said, because the IRS may ask them to substantiate withdrawals years later.

Matthew Hofacre, founder and senior financial planner at Worthington, Ohio-based Pay It Forward Financial Planning, said he advises clients to budget their HSA usage and cover minor expenses out of pocket, such as copays and over the counter purchases. 

Because of an HSA’s long-term benefits, clients will generally do better if they strategize and preserve HSA dollars, allowing contributions to grow over many years, if not decades, Hofacre said. Then the account can work for the client in the future if a major medical emergency arises.

“Keep that money in the HSA if it doesn’t jeopardize your financial health in the short term,” Hofacre said. “I try to have people not use their HSA for expenses like $50 copays, because you may be able to use your HSA down the line for bigger expenses, like a $10,000 or $15,000 medical bill.”