Can You Use Your HSA for Anything After 65?

Once you turn 65, using your HSA after 65 gets much more flexible: the 20 percent penalty on non-medical withdrawals disappears, so you can spend the money on anything. Qualified medical expenses still come out completely tax-free, and that now includes Medicare premiums. Anything you spend on non-medical items is taxed as ordinary income, but nothing more.

What Changes at 65

Before 65, pulling HSA money out for anything other than a qualified medical expense costs you a 20 percent additional tax on top of regular income tax. At 65, that penalty is gone. The tax code exempts distributions made after you reach the age set by Section 1811 of the Social Security Act, which is 65.¹

In practical terms, your HSA now behaves a lot like a traditional IRA for non-medical spending: withdrawals come out penalty-free, with only ordinary income tax due. And it keeps its original superpower on top of that — anything you spend on qualified medical care still comes out completely tax-free.

Medical Expenses Still Come Out Tax-Free

The most valuable use of your HSA after 65 is still qualified medical expenses, because those distributions carry no income tax and no penalty. The list is broader than many people expect. You can use HSA funds tax-free for:

Dental care, including cleanings, crowns, bridges, dentures, and dental plan copays
Vision care, including prescription eyeglasses, contact lenses, eye exams, and vision plan deductibles
Hearing aids and batteries
Copays and deductibles from any medical, dental, or vision plan
Prescription medications
Long-term care services such as nursing care, assisted living, and home health aides when medically necessary

Qualified expenses must be for you, your spouse, or your tax dependents.² Because Medicare does not cover dental, vision, or hearing in most cases, the HSA fills those gaps with pre-tax dollars.

Medicare and Insurance Premiums You Can Pay Tax-Free

After 65, your HSA can also pay for certain insurance premiums tax-free. This is a specific exception to the general rule that HSA funds cannot cover insurance costs. Qualifying premiums include:²

Medicare Part B (outpatient and doctor services)
Medicare Part D (prescription drugs)
Medicare Advantage, or Part C
Medicare Part A, if you pay a premium (most people get Part A premium-free)
Long-term care insurance, subject to age-based annual limits

Paying these premiums from the HSA is more tax-efficient than paying them out of Social Security benefits or other after-tax income, because the HSA distribution is excluded from your gross income entirely.

Long-Term Care Insurance Premium Limits

The amount of long-term care insurance premiums that qualifies as a tax-free HSA distribution is capped each year based on age. For 2026:

Age 61 to 70: up to $4,960
Age 71 and older: up to $6,200

Any premium above the cap is treated like a non-medical distribution: no penalty after 65, but subject to income tax.

Medigap Premiums Do Not Qualify

One important exclusion: Medicare Supplement Insurance (Medigap) premiums are not on the IRS list of qualified expenses.² If you use HSA funds for Medigap after 65, there is no 20 percent penalty, but the withdrawal is taxed as income.

Non-Medical Withdrawals: No Penalty, But Still Taxed

The penalty going away is not the same as tax going away. Any HSA distribution you do not spend on qualified medical expenses counts as taxable gross income for the year you take it.¹ You report the amount on Form 8889, and it is taxed at your regular rate, anywhere from 10 to 37 percent depending on total income and filing status.³

Because a non-medical withdrawal increases your taxable income for the year, a large one-time distribution can push you into a higher bracket or increase the share of your Social Security benefits subject to tax. Spreading withdrawals across multiple tax years helps manage that. Keep clean records of every distribution so you can separate tax-free medical spending from taxable general spending; underreporting can lead to IRS interest charges on the unpaid tax.

Reimbursing Yourself for Past Medical Expenses

One of the most useful HSA features gets more valuable the longer you have had the account: there is no deadline for reimbursing yourself for a qualified medical expense. As long as the expense was incurred after your HSA was established, you can pay out of pocket now and reimburse yourself days, years, or decades later.²

If you paid $3,000 out of pocket for dental work five years ago while your HSA was open, you can withdraw $3,000 today tax-free as reimbursement for that expense. The balance grows tax-free in the meantime, and you preserve the right to a tax-free distribution later. To use this approach, keep records showing:

The expense was incurred after you opened the HSA
The expense was not previously reimbursed from any other source
You did not claim the same expense as an itemized deduction on a prior tax return

You do not submit these records with your return, but keep them with your tax files in case the IRS asks.²

Contributing After 65

Turning 65 does not by itself end your ability to contribute to an HSA. Enrolling in Medicare does. Once you are enrolled in any part of Medicare, including premium-free Part A, your contribution limit drops to zero.² You can still spend down existing HSA funds; you just cannot add new money.

If you are still working past 65, have not enrolled in Medicare, and are covered by a qualifying high-deductible health plan, you can keep contributing. For 2026, the annual limits are $4,400 for self-only coverage and $8,750 for family coverage, plus a $1,000 catch-up if you are 55 or older.⁴

The Medicare Lookback Trap

If you delay Medicare past 65 specifically to keep contributing, watch the timing. When you later apply for Social Security after 65, Medicare Part A coverage is backdated up to six months from your application date.⁵ Part A cannot start earlier than the month you turned 65, but that lookback can still overlap months when you were still contributing.⁶

Any contributions made during months retroactively covered by Medicare become excess contributions, which carry a 6 percent excise tax for each year they remain in the account.⁷ You report and pay it on Form 5329.⁸ To avoid this, stop contributing at least six months before you plan to apply for Social Security or Medicare.

If you end up with excess contributions anyway, you can fix it by withdrawing the excess amount plus any earnings on it before your tax filing deadline for that year. Miss the deadline and the 6 percent tax applies annually until you either remove the excess or absorb it by under-contributing in a later year.

What Happens to Your HSA When You Die

The HSA does not disappear when you die, but the tax treatment depends entirely on who inherits it.

If your spouse is the named beneficiary, the account simply transfers and continues to function as an HSA. Your spouse becomes the new account holder and can use the funds tax-free for their own qualified medical expenses. No income tax is due on the transfer.¹

If anyone other than your spouse inherits, whether a child, sibling, or other individual, the account stops being an HSA on the date of your death. The full fair market value is included in that person’s taxable income for the year you died.⁹ The taxable amount can be reduced by any of your medical expenses the beneficiary pays within one year of your death. If your estate is the beneficiary rather than a named individual, the account value goes on your final income tax return.2

Because the gap between a spouse and non-spouse inheritance is so large, check your named beneficiary if your family situation has changed since you opened the account.

1
Office of the Law Revision Counsel. 26 USC 223 Health Savings Accounts
2
Internal Revenue Service. Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans
3
Internal Revenue Service. Instructions for Form 8889
4
Internal Revenue Service. IRS Notice 26-05
5
Social Security Administration. Plan for Medicare – When to Sign Up for Medicare
6
Medicare. When Does Medicare Coverage Start
7
Office of the Law Revision Counsel. 26 USC 4973 Tax on Excess Contributions
8
Internal Revenue Service. Instructions for Form 5329
9
Office of the Law Revision Counsel. 26 USC 223 Health Savings Accounts>