Can you use a HSA for groceries?

Discover how you can make the most of your Health Savings Account (HSA) by using it for groceries in 2024.

In recent years, health savings accounts (HSAs) have gained popularity as a way for individuals to save money for medical expenses. These tax-advantaged accounts allow individuals to contribute money on a pre-tax basis and withdraw it tax-free for qualified medical expenses. But what about using an HSA for groceries? Can you use these funds to stock up on your favorite foods? Let's delve into this topic and see what the rules and regulations say.

Can you use HSA for groceries?

One of the most commonly asked questions regarding Health Savings Accounts (HSAs) is whether or not they can be used for groceries. The short answer is no. According to current IRS regulations, groceries are not considered a qualified medical expense and therefore cannot be paid for using HSA funds.

HSAs are tax-advantaged savings accounts that are designed to help individuals and families save money for medical expenses. Contributions to HSAs are made on a pre-tax basis, and any funds withdrawn for qualified medical expenses are tax-free. These accounts are often paired with high-deductible health insurance plans, as they provide a way for individuals to save for their out-of-pocket medical costs.

Qualified medical expenses, as defined by the IRS, include a wide range of healthcare-related costs such as doctor visits, prescription medications, hospital stays, and medical procedures. However, groceries, which are considered a basic necessity for everyday living, do not fall under this category.

While it may be disappointing to learn that groceries cannot be paid for using HSA funds, it's important to remember that the primary purpose of an HSA is to save for healthcare expenses. By limiting the use of HSA funds to qualified medical expenses, the IRS aims to ensure that these accounts are used for their intended purpose.

That being said, there are certain exceptions to the rule. In some cases, certain grocery items may be considered qualified medical expenses if they are specifically prescribed by a healthcare professional to treat a specific medical condition. For example, if a doctor prescribes a special diet for a patient with a specific medical condition, the cost of the groceries needed to follow that diet may be eligible for reimbursement from an HSA.

It's important to note that in order to use HSA funds for these exceptions, proper documentation and proof of medical necessity may be required. This can include a written prescription from a healthcare professional, as well as receipts and documentation showing the purchase of the prescribed groceries.

While the ability to use HSA funds for groceries is limited, it's worth exploring other ways to save money on food expenses. For example, some employers offer flexible spending accounts (FSAs) in addition to HSAs. FSAs are similar to HSAs in that they allow for pre-tax contributions and tax-free withdrawals for qualified expenses. However, unlike HSAs, FSAs can be used for a wider range of expenses, including certain over-the-counter medications and supplies.

Additionally, there are other government assistance programs, such as the Supplemental Nutrition Assistance Program (SNAP), that can help individuals and families with their grocery expenses. SNAP provides eligible low-income individuals and families with funds to purchase food items at authorized retailers.

In conclusion, while HSAs cannot be used for groceries as a general rule, there are exceptions for certain medically necessary items. It's important to consult with a healthcare professional and familiarize yourself with the IRS guidelines to determine if your specific situation qualifies for these exceptions. Remember, HSAs are a valuable tool for saving money on healthcare expenses, and understanding the rules and regulations surrounding their use is essential for maximizing their benefits.

Can you use a health saving account (HSA) for groceries?

Just to clarify, a health savings account (HSA) is a type of savings account that allows individuals with high-deductible health plans (HDHPs) to save money for medical expenses. These accounts are typically offered by employers, although individuals can also open an HSA on their own. While HSAs offer great flexibility in terms of eligible expenses, groceries are generally not among them.

What are the benefits of using an HSA for groceries?

While you can't use HSA funds to directly pay for groceries, there are still some indirect benefits to using an HSA for your healthcare expenses. For one, the money you contribute to your HSA is tax-deductible, meaning you can lower your taxable income for the year. Additionally, any money you contribute to your HSA grows tax-free, allowing you to potentially accumulate significant savings over time. These savings can then be used to offset the cost of your medical expenses, freeing up more of your regular income for other purposes such as groceries.

What are the downsides of using an HSA for groceries?

As mentioned earlier, using HSA funds directly for groceries is not allowed under current IRS regulations. This can be seen as a downside for individuals looking to use their HSA money for day-to-day expenses. Additionally, if you withdraw money from your HSA for non-qualified expenses, you may have to pay income tax on the amount withdrawn as well as a penalty. It's important to carefully consider the financial implications before using your HSA funds for anything other than qualified medical expenses.

HSA vs FSA for groceries

If you're looking for a way to use pre-tax dollars towards groceries, you may want to explore a flexible spending account (FSA) instead of an HSA. Like an HSA, an FSA is a tax-advantaged account designed to help individuals save money for qualified medical expenses. However, FSAs often come with a "use it or lose it" policy, meaning any money remaining in the account at the end of the plan year is forfeited. Some employers, however, allow a limited carryover or grace period for FSA funds. It's important to review the specifics of your FSA plan to fully understand your options.

Where can you find more information about HSA eligibility for groceries?

If you have further questions or would like more information about HSA eligibility for groceries, it's best to consult the official IRS guidelines or speak with a qualified tax professional. The rules and regulations surrounding HSAs can be complex, and it's important to fully understand them to make the most informed decisions about your healthcare and financial planning.

While the idea of using HSA funds to pay for groceries may be appealing, it's important to remember the primary purpose of these accounts - to save for qualified medical expenses. By using your HSA funds wisely and understanding the rules and regulations, you can make the most of this valuable financial tool and better manage your healthcare costs.

What do you do if you're unsure?

If you’re unsure, it’s best to consult your HSA provider or a tax professional to confirm expense eligibility. 

What are HSA benefits for employers?

If you’re an employer, there are multiple benefits to offering HSA to your employees, including:

  • Attracting and retaining talent
  • It’s a cost-effective healthcare option
  • Enhances employee satisfaction and productivity
  • Increases the utilization of employee benefits
  • Has tax advantages for both you and your employees

Want to learn more? Check out our blog on what is an HSA

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Looking to offer an HSA as part of your employee benefits package? At Forma, we provide Pre-tax Accounts - including HSAs - to companies worldwide. 

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