Can You Use HSA for Anything After 65? Taxes, Medicare, and Heirs

Yes, you can use an HSA for anything after 65. Once you reach that birthday, the 20% penalty for non-medical withdrawals goes away, so you can spend the balance on housing, travel, groceries, or any other purpose.¹ The catch is taxes: non-medical withdrawals get added to your gross income and taxed at your ordinary rate, exactly like money pulled from a traditional IRA. Medical withdrawals stay completely tax-free, which is why the account is still worth using strategically rather than draining.

How Non-Medical Withdrawals Work After 65

Before 65, taking HSA money for anything other than a qualified medical expense triggers a 20% penalty plus regular income tax. That penalty disappears at 65, and it also disappears earlier if you become disabled or die.¹ After that, the account behaves like a traditional IRA for non-medical spending: withdraw what you want, report it as income, pay ordinary tax on it.

Because medical withdrawals are still tax-free at any age, the sensible order of operations in retirement is to spend the HSA on healthcare first and reach for it for general expenses only when other retirement accounts make less sense tax-wise. Letting the balance grow and pairing it with future medical costs preserves the biggest advantage the account offers.

What Still Comes Out Tax-Free

Qualified medical expenses cover more than most people expect: doctor visits, hospital stays, prescription drugs, hearing aids, dental work, vision correction, over-the-counter medications, blood sugar test kits, and certain home modifications for medical reasons.² Long-term care services also qualify when they involve help with daily living activities for someone chronically ill under a plan from a licensed practitioner.³ Given the size of long-term care bills, that is one of the highest-value uses for an accumulated HSA.

The tax-free treatment extends beyond you. You can pay for qualified medical expenses of your spouse or anyone you claim as a dependent, tax-free, even if your spouse is on Medicare and has no HSA of their own.¹ Their copays, dental implants, and hearing aids all qualify from your account.

Medicare Premiums and the Medigap Exception

Insurance premiums generally are not qualified medical expenses, but 65 opens several exceptions. You can use HSA funds tax-free for premiums on Medicare Part B, Medicare Part D, and Medicare Advantage (Part C).¹ For many retirees, Part B and Part D alone run several thousand dollars a year.

COBRA premiums qualify at any age, which matters if you retire before 65 and bridge to Medicare with COBRA coverage.⁴ Long-term care insurance premiums also qualify, subject to an age-based cap on the deductible amount.

Medigap is the exception people miss. Premiums for Medicare supplemental policies are specifically excluded, so any HSA withdrawal used for a Medigap premium is taxed as ordinary income.¹ Premiums for employer-sponsored retiree health plans are not on the qualified list either. If your Medicare premiums come out of your Social Security check automatically, you can still reimburse yourself from the HSA afterward; the benefit statement showing the deduction is your documentation.

Stop Contributing Before Medicare Starts

Spending from an HSA after 65 is easy. Contributing is where things go wrong. The moment you enroll in any part of Medicare, your HSA contribution limit drops to zero.¹ You keep the account and can still withdraw from it, but new deposits are not allowed. That applies to Part A, Part B, or both.

The retroactive coverage rule is the trap. When you apply for Medicare after 65, Part A can be backdated up to six months. Any contributions you made during those retroactive months become excess contributions, subject to a 6% excise tax for every year the excess stays in the account.¹ Applying for Social Security triggers the same problem because it automatically enrolls you in Part A.

The safe move is to stop all HSA contributions, including payroll deductions and employer contributions, at least six months before you apply for Medicare or Social Security. If you are still working at 65, covered by an employer high-deductible health plan, and have not filed for Social Security, you can delay Medicare and keep contributing. For 2026, the limits are $4,400 for self-only coverage, $8,750 for family coverage, and an additional $1,000 catch-up contribution if you are 55 or older.⁵

Reimbursing Yourself for Old Medical Expenses

One rule quietly expands what “use it for anything” really means. There is no deadline to reimburse yourself for a past medical expense, as long as the expense was incurred after your HSA was established.¹ If you paid $3,000 out of pocket for dental work five years ago and kept the receipt, you can pull $3,000 from the HSA today, tax-free, as reimbursement.

That opens a common strategy: pay medical bills out of pocket during your working years, let the HSA grow through investments, then reimburse yourself in retirement when you want cash without the tax hit. The requirement is documentation matching each expense to a date after account opening. Explanation of Benefits statements, pharmacy receipts, and provider invoices all work; a digital filing system is worth setting up because you may be pulling receipts from years back.⁶

What Happens to Your HSA When You Die

The beneficiary you name determines whether the account keeps its tax treatment or collapses into income.

If your spouse is the beneficiary, the HSA becomes theirs. They can keep it open, continue tax-free medical withdrawals, and take penalty-free non-medical distributions once they are 65.¹ If they are under 65 and covered by a high-deductible health plan, they can even contribute.

If anyone other than your spouse inherits it, the account stops being an HSA the day you die, and the entire fair market value becomes taxable income to that beneficiary that year.¹ The beneficiary can reduce the taxable amount by any qualified medical expenses of yours they pay within one year of your death. If your estate is named instead of a person, the value lands on your final income tax return. For larger balances, naming a spouse is almost always better tax treatment.

Reporting and a State Tax Note

Every year you take a distribution, you file Form 8889 with your return. Your custodian sends a Form 1099-SA showing total distributions; on Form 8889 you subtract the portion used for qualified medical expenses, and the remainder is taxable. If you are 65 or older, check the box for the age-65 exception so no 20% additional tax gets calculated on the non-medical portion.⁶ The IRS does not require you to attach receipts, but keep them: date of service, provider, description, amount paid.

All of the above is federal treatment. A few states do not fully recognize HSA tax benefits, so contributions and earnings can be taxed at the state level even when they are federally tax-free. If you live in one of those states, a non-medical withdrawal after 65 may carry a slightly higher effective tax rate than the federal numbers suggest. Check your state’s rules before you plan a drawdown around the account.

1
Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans
2
Internal Revenue Service. Publication 502 (2025), Medical and Dental Expenses
3
Office of the Law Revision Counsel. 26 USC 7702B – Treatment of Qualified Long-Term Care Insurance
4
Internal Revenue Service. IRS Notice 2004-2, Qualified Medical Expenses for HSA Distributions
5
Internal Revenue Service. Rev. Proc. 2025-19
6
Internal Revenue Service. 2025 Instructions for Form 8889 – Health Savings Accounts (HSAs)