An HSA is a health savings account. In other words “the most tax-preferred account available.” The HSA is primarily supposed to provide money for health services. However, there are some non-medical uses for an HSA. In this post I will address some uses an HSA has outside of health services.
HSAs are supposed to be used for qualified health expenses. However, people can easily miss using an HSA for these purposes. There are ways to re-obtain these lost opportunities. If you keep the receipts from your qualified medical purposes you could receive a reimbursement from your HSA for non-medical uses. That is the theory at least. I would not be surprised if there are many hoops to jump through and many rejections of reimbursement. However, this is still a good use of an HSA.
There is a more universal non-medical use for an HSA. That is as a retirement fund. HSAs are the most tax-advantaged funds. Contributions are tax-deductible. All money that grows is tax-deferred, and if the withdrawals are for qualified medical purposes, they are tax-free. What if you do not ever have any medical needs? First of all, really? What makes you the first human to have no need for health services? Second, to know that you are healthy, you need to have regular visits to the doctor. Third, if you never have medical expenses by the time you are 65, you can withdraw from your HSA without any penalties. This makes an HSA like an IRA.
However, withdrawals from your HSA for non-medical purposes will have an income tax. It will be like an IRA, not like a Roth IRA at that point. You could use any money you have not withdraw from medical uses in retirement without any penalty. Remember, you can also withdraw the money during retirement for medical uses completely tax-free.
Make Your Real Estate Safe
It is worth mentioning that I have interpreted this point from real estate from the IRS 2019 502 document illustrating what can be covered by an HSA and what cannot. Make sure to contact an expert before you attempt any of my tactics to be sure you do not face the 20% penalty nor the taxes from an unqualified withdrawal.
Lead paint is a major health issue, especially for children. In fact, it is so widespread most landlords must include a notice about potential lead paint if the property was made before 1978. This includes property where the landlord removed the lead paint and painted the real estate with non-lead paint.
If you have purchased a home or real estate investment, the IRS 502 document says lead paint removal counts as a qualified medical expense. You could use money from your HSA to remove potentially dangerous lead paint from your home/investment. There are requirements though. The paint must be peeling, cracked, or within reach of a child. If the ceiling has lead paint on it, and it looks pristine, too bad. Furthermore, repainting costs are not qualified medical expenses, but wall paper may be. Considering the potential for black mold formation from wall paper, you should not put up wall paper.
Either way, you will either have a lead-free home or real estate investment. This will give you piece of mind and also raise the value of your property.
HSAs are surprisingly versatile funds. They can be used for every time you need to go to the doctor, which is all but guaranteed to happen. You can also use it as an emergency fund with more potential to grow than you 0.1% interest bank account. Furthermore, you can improve your net worth with an HSA. An HSA can be a retirement fund or a way to improve your real estate. Either way, you can use an HSA to forge your wealth.