Can I Borrow From My Health Savings Account?

A Health Savings Account, or HSA, is a tax-advantaged account that can be used to pay or reimburse qualified medical expenses. It gives account holders a way to set aside money for healthcare costs while receiving federal tax advantages.

An HSA cannot be used as a loan account, even though account holders can withdraw money from it. HSA funds also cannot be pledged as collateral for a loan. The tax treatment of a withdrawal depends largely on how the money is used.

Withdrawals for qualified medical expenses can generally be taken tax-free, while money used for other purposes may be subject to income tax and additional tax consequences. For Texas employees and families, knowing the difference between borrowing and withdrawing can help prevent an expensive tax mistake. Employers and HR teams can support that understanding by explaining how employees access their accounts and where to find the rules that apply.

How a Health Savings Account Works

HSAs are designed to help people set aside money for qualified medical expenses. To make HSA contributions, an individual generally must be enrolled in an eligible high-deductible health plan and meet other federal eligibility requirements.

Contributions made through an employer may be excluded from taxable income, while qualifying contributions made directly by the account holder may be deductible. The money can then grow tax-free, and qualified medical withdrawals are generally tax-free. Employers may contribute to an employee’s HSA, and employees can make their own contributions.

Because the account is individually owned, it stays with the person rather than the employer. If an employee changes jobs or leaves the workforce, the HSA and its balance go with that person. Unused funds roll over from year to year instead of expiring at the end of the plan year.

Borrowing Money From an HSA

Federal tax rules prohibit using an HSA as a source of loans. Lending money between the account holder and the HSA is considered a prohibited transaction. Using HSA assets as security for a loan can also cause the pledged amount to be treated as a taxable distribution.

An HSA owner can request a withdrawal, but doing so does not create a loan that can be repaid on a normal schedule. If the owner later makes a new HSA contribution, that deposit is treated under the normal contribution rules rather than as repayment of the earlier withdrawal.
If an unexpected medical bill is the reason someone needs the money, a distribution may be available instead of a loan.

Can You Withdraw HSA Funds at Any Time?

HSA account holders are generally allowed to take distributions at any time. They do not have to remain eligible to make HSA contributions before using money that is already in the account.

What the money is used for determines how the withdrawal is taxed. If HSA funds pay or reimburse qualified medical expenses for the account holder, spouse, or qualifying dependents, the distribution can generally be excluded from taxable income. A withdrawal for a non-medical purpose is usually taxable and may trigger an additional tax.

Access methods depend on the HSA administrator and may include an HSA debit card, online transfer, or reimbursement to a personal bank account. Once withdrawn, HSA money can be transferred to a personal account and used like other cash. Account holders should keep records showing whether the distribution reimbursed a qualified medical expense.
Using HSA Funds for Qualified Medical Expenses

Qualified medical expenses generally include unreimbursed healthcare costs that meet federal requirements. IRS Publication 502 provides more detail on medical and dental expenses, although HSA rules contain some additional provisions.

Common eligible costs can include doctor visits, prescription medications, dental treatment, vision care, and other qualifying healthcare services. Depending on the expense, HSA money may also be used toward costs such as deductibles, copays, and coinsurance. Some over-the-counter medicines and health products may qualify under current federal rules. HSA funds can generally be used for the account holder’s expenses and qualified expenses for a spouse or dependent.

Tax-free treatment depends on when and how the expense was paid. The medical cost generally must have been incurred after the HSA was established, and it cannot already have been reimbursed by insurance or another source or claimed as an itemized medical deduction. Account holders should check current IRS guidance or their HSA administrator when they are unsure whether an expense qualifies.

Reimbursing Yourself for Past Medical Expenses

HSA owners do not have to reimburse themselves immediately after paying a qualifying medical bill. Federal rules generally allow reimbursement later for qualified medical expenses incurred after the account was established.

For example, someone might pay a qualified medical bill from a checking account and leave the HSA funds untouched. If the required records are kept, that person may be able to take a tax-free reimbursement from the HSA later.

The account holder is responsible for showing that a distribution was used for an eligible medical expense. Receipts, bills, explanations of benefits, and payment records can document the cost and show that it was not reimbursed elsewhere or claimed as an itemized deduction.

What Happens if You Use HSA Funds for Non-Medical Expenses?

HSA money can be withdrawn for something other than qualified medical expenses, but the nonqualified amount is generally included in taxable income.

For account holders under age 65, an additional 20% tax generally applies to nonqualified distributions. That can make an HSA an expensive source of money for ordinary purchases or other non-medical expenses.

After age 65, the additional 20% tax generally no longer applies. Nonqualified distributions are still usually subject to ordinary income tax, while qualified medical withdrawals can continue to receive tax-free treatment. Account holders should understand those consequences before taking money out for another purpose.

HSA Contributions and 2026 Limits

HSA contributions are subject to annual federal limits. For 2026, the maximum contribution is $4,400 for someone with self-only qualifying coverage and $8,750 for someone with family coverage. People age 55 or older who qualify to contribute can make an additional $1,000 catch-up contribution.

Employer contributions count toward the same annual limit as employee contributions. Eligibility to contribute also depends on meeting federal HSA requirements, including having qualifying health coverage. Someone who can no longer contribute may still keep the account and use existing funds according to the distribution rules.

What Employers and HR Teams Should Know

For Texas employers offering group health insurance with an HSA-compatible option, employees may confuse contributions, withdrawals, and borrowing. Explaining those differences during enrollment can prevent employees from assuming the HSA works like a credit account.

When employees need details about debit cards, transfers, reimbursements, balances, or documentation, HR can direct them to the HSA administrator without interpreting an individual tax situation.

In most cases, only funds that have already been contributed are available, so employees should understand the timing of payroll deposits and employer contributions. It can also help to explain the annual contribution limit, the need to keep receipts, and where to find the HSA administrator’s contact information and reimbursement instructions.

Open enrollment materials can reinforce those basics by identifying the HSA administrator, explaining how contributions reach the account, and showing employees where to verify whether a medical expense qualifies. That gives employees practical information they can return to when they begin using the account.

What Is the Smartest Way to Use an HSA?

A practical approach is to use the account for qualified expenses, keep good records, and check the tax consequences before making a non-medical withdrawal.

Some people use HSA funds as medical bills arise, while others pay certain expenses from other funds and reimburse themselves later. The choice may depend on current healthcare costs, available savings, and how much money the account holder wants to leave available for future medical expenses. Some HSA providers offer investment options for balances above a required minimum. Fees, investment choices, and account rules vary, so account holders should review the features available through their own provider.

Because unused balances roll over, HSA owners do not have to spend the money by the end of the year. They can use it for current qualified expenses or retain it for future healthcare costs.

Compare HSA-Compatible Health Plans with Selected Benefits

Selected Benefits helps Texas employers, individuals, and families compare health insurance options, including plans that may be compatible with a Health Savings Account. Employers can review plan costs and HSA features as part of their benefits package, while people shopping for coverage on their own can compare individual and family health insurance options.

HSA eligibility, premiums, deductibles, provider networks, prescription coverage, and out-of-pocket costs can affect both access to care and what a household or business pays. Selected Benefits can help clients compare those features across available plans and identify options that fit their coverage needs and budget.

Contact Selected Benefits to discuss HSA-compatible health insurance options for your Texas business or household.