Short answer: You do. HSA withdrawals are not monitored in real time, so it is your responsibility to ensure funds are used only for qualified medical expenses.
Unlike Flexible Spending Accounts (FSAs) or Health Reimbursement Arrangements (HRAs), Health Savings Accounts do not have a claims review or approval process. When you take money out of an HSA, no one checks the expense at the time of withdrawal.
Instead, responsibility rests entirely with you as the account holder. You may use HSA funds freely, but you must ensure that each withdrawal is for a qualified medical expense under IRS rules.
You are also responsible for keeping records that substantiate your HSA distributions. These records are not submitted to your HSA provider but should be retained in case the IRS questions a distribution during a tax audit.
Helpful documentation includes receipts or explanations of benefits, dates of service, proof of payment, and a description showing that the expense was medical in nature.
If HSA funds are used for non-qualified expenses, the amount withdrawn becomes taxable income. If you are under age 65, an additional 20% penalty generally applies. After age 65, non-medical withdrawals are still taxable, but the penalty no longer applies.
Sources
- IRS, Publication 969 ā Health Savings Accounts: https://www.irs.gov/forms-pubs/about-publication-969
- IRS, FAQs on Health Savings Accounts ā Distributions: https://www.irs.gov/faqs/health-savings-accounts-hsas
Content history
Originally published: March 27, 2025
Last reviewed: January 26, 2026