I used CareCredit to pay for Dental expenses in 2016. Can I use my HSA to make monthly CareCredit payments?

[Opus 17]

First of all, you can't do both.  If you pay for medical expenses with an HSA, you can't also take a tax deduction, because you already paid with tax-free money. Paying for medical expenses with a loan or credit card in 2016 counts as paying them in 2016, even if you won't pay off the loan until later.  But not if you intend to pay it off with an HSA.

Secondly, you can only deduct OR use the HSA for "qualifying" medical expenses.  Qualifying expenses are those listed as deductible in publication 502. https://www.irs.gov/pub/irs-pdf/p502.pdf

In particular, you can't deduct or use an HSA to pay for cosmetic procedures.  For dentistry, you can deduct or use an HSA to pay for care that prevents disease, and care that treats disease or injury to your teeth.  But cosmetic procedures, such as teeth whitening or veneers, are not qualified for a deduction or HSA unless they are part of the treatment for a disease or injury. 

[k-and92]

So under publication 502 (<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/p502.pdf">https://www.irs.gov/pub/irs-pdf/p502.pdf</a>), the dental expenses that I incurred qualify as medical expenses. I used CareCredit to pay for these expenses in 2016 so, as you stated, they are counted as being paid in 2016. My question now is can I use HSA to make the monthly CareCredit payments?

[Opus 17]

Yes but...

If you take a tax deduction in 2016 on the basis of the fact that you had the expense in 2016, then the payments you make with HSA money have to be added back to your taxable income, because taking a deduction and paying with tax-free HSA is double dipping.  If you plan to use the HSA to make the monthly payments, you should just skip the medical expense deduction.  

And there is one other point I forgot to add: you can only use the HSA to reimburse the dental care if the HSA was open when you actually received the care (even if the HSA did not have enough money to pay for the care.)  But if you only opened the HSA after the dental care was provided, you can't use the HSA to pay the bill.

[yomero]

I know this in an old question, but I want to make sure I did understand this answer. I do have an HSA. got my HSA more than a year ago since I joined my current job. About 5 weeks ago I had a dental expense (which qualifies as medical expense as per the IRS rules). I paid half of the expense with my HSA card and the rest I used a CareCredit. The first payment is due in a a few days. I'll be paying the rest for the next 12 months with no interest. So, simple question: can I pay the monthly payments with my HSA? I didn't understand this part of the answer "If you take a tax deduction in 2016 on the basis of the fact that you had the expense in 2016, then the payments you make with HSA money have to be added back to your taxable income, because taking a deduction and paying with tax-free HSA is double dipping" What does that mean?

[Opus 17]

@yomero your comment at the end references a different situation.

Regarding an HSA, you can use HSA funds to pay for qualified care that is provided after the HSA is opened.  If the HSA does not have enough funds to pay the bill all at once, it is allowed that you can contribute money to the HSA and then withdraw it the next day to either pay the care bill or reimburse yourself.  In effect, "washing" the money through the account to get the tax savings.

Supposing you paid the provider in full out of pocket; you can contribute money to the HSA and immediately withdraw it to reimburse yourself.  If you pay on time, you can make the payments by depositing money into your HSA, withdraw it back to your checking account, and then use it to pay the bill.  However, you can't pay INTEREST this way, you can only withdraw from the HSA up to the amount of the original qualified medical expense.  And of course, you are also limited by whatever annual HSA contribution limit applies to your situation.  

The "double dipping" comment refers to the issue of taking an itemized tax deduction for medical expenses on schedule A.  You can't get two tax breaks for the same expense -- you can't take a tax deduction for the amount you paid out of pocket, and also get reimbursed from an HSA.  

For example, suppose you opened an HSA in 2016, and you had a $5000 medical expense in 2017, paid all out of pocket.  Because it was paid out of pocket, you take the itemized deduction for medical expenses.  Then in 2018, you realize that you could reimburse yourself by depositing $5000 in the HSA and then immediately withdrawing it, to get a tax deduction.  Because you previously reported the expense as a tax deduction (and that's not allowed if you get reimbursed from the HSA) you have to make a correction for the deduction.  Many people never actually take the medical expense deduction because of the 7.5% floor on the deduction, so this likely doesn't apply to you.

[dmertz]

CareCredit is simply a credit card used to pay for out-of-pocket medical expenses and is not any kind of insurance.

Payments made to reduce the balance owed on a credit card are not themselves qualified medical expenses.  However, there is nothing wrong with obtaining a distribution from your HSA to reimburse yourself for out-of-pocket medical expenses incurred after the establishment of the HSA originally paid with the credit card (or money from any other source) as long as you did not claim a medical-expense deduction for those out-of pocket medical expenses, then using the money distributed from the HSA to pay off some portion of the credit card balance (or whatever else you want to do with the money).  The HSA distribution corresponds to the qualified medical expense, not to the credit-card payment.

[elmo0016]

I had the same question.  Short answer is No, you can not pay your monthly Care Credit payments with your HSA debit card or account.  I contacted Care Credit Customer Service to check and they confirmed that in order to make the monthly payments on the Care Credit Card you would need to mail in a payment (check) or link your banks routing number up online.  Below is a statement I found on Care Credit's website. 

"Please note: Payment by FSA/HSA or credit card is not available.  Payments are also not accepted directly at your provider's office as well."

[Critter]

Correct ... you cannot make a payment to Care Credit directly from the HSA however you can pay the bill yourself then reimburse yourself from the HSA ... hence the  "washing" process that was mentioned above. 

[BMcCalpin]

To reinforce dmertz's answer - you CAN use HSA funds to pay amounts on the CareCredit account that correspond directly to medical expenses, but you cannot pay for interest or service fees on the CareCredit card with HSA funds. If you use HSA funds to make payments to the CareCredit card, your records have to show how the HSA amounts where only for qualified medical expenses and not for credit card interest or other fees.

[Mirandarose9898]

Question,

can I use my HSA to pay for veneers? I know for my case it won’t be for medical purposes. Is there a way to use the money but use it taxed? I’ve been saving up to fix my teeth and make them straight and this is the only form of money I have.

thanks 

[dmertz]

Cosmetic procedures are generally not qualified medical expenses.  You can use a distribution from an HSA to pay for anything, but if it's not applied to a qualified medical expense the distribution is subject to ordinary income tax and, if you are under age 65 at the time of the distribution, to a 20% early-distribution penalty.

[mmora059]

I had a dental procedure in 2019 and I paid with my CareCredit, which I have to pay until Jan 2021. Can I pay my remaining Balance in 2020 and file a claim to my HSA for the amount paid in 2020? This is my first year with the spending account and I am not sure how it works 

[mmora059]

My dental procedure was at the end of 2019 and I paid with my CreditCare, and but that time I did not have HSA, so now since 2020 I have an HSA, and still paying my CareCredit. is it possible to pay my Balance in 2020 and request a HSA reimbursement for the payment done during 2020? 

[Opus 17]

Medical expenses are only eligible if the actual treatment or procedure occurred after the start of the HSA account.  Now, if you previously had an HSA, and then closed it because you changed employers, and this is a new HSA, then the clock started with your first HSA. However, if this is your first HSA, your 2019 medical expenses are not eligible.