Here at Tango, we hear the confusion every day, in calls to our call center, during implementation kick-off calls with clients, throughout open enrollment meetings, and in news articles about Health Savings Accounts (HSAs):

• “I should target to fund my HSA up to my medical deductible or out of pocket, right?”
• “Shouldn’t my HSA only be used for claims I send to my insurance company.”
• “I can’t use it for my LASIK surgery, isn’t that correct?”

As the Director of Client Services, I’m proud of how my team of HSA experts busts these myths and help our clients gain the tax break they deserve. In a previous post, we explained 3 common HSA management styles that we see with our clients: Savers, Planners, and Non-Planners. But how do Tango employees manage our HSAs ourselves?

I’m a bit of a hybrid of two of them: I’m a Saver by the numbers (I max out my contribution) but I don’t plan ahead and like to reimburse myself when I have expenses, like a Non-Planner.  It’s not that I ignore my health expenses or don’t keep track of them – I just keep finding eligible expenses that aren’t covered by my medical insurance.

I’ll share a little secret that I learned after using my own HSA, if you’re like many people who only use your HSA for expenses that go towards your medical deductible you’re missing out on so many other qualified expenses! Over the past three months I only spent $50 toward my medical deductible with my HSA and still saved $250 in taxes.

Here’s a quick tally of my non-medical insurance spending of the past three months:

• Eye doctor appointment, a year of contact lenses, and prescription glasses: $510
• Out of network dental visit with x-rays: $185
• Non-covered prescription medication: $80 per month
• Acupuncture: $110 per month

Total for three months: $1,045 with tax savings (conservatively at 25%) of $261.25. I hadn’t planned on any of that and still have a long way to hitting my medical deductible.

So how did I do it? My main strategy is rather than basing what medical expenses I record on my medical insurance coverage, I base them off what the IRS considers health spending. My adult braces, all my dental procedures, every band-aid, my weekly disposable contact lenses (and their solution), my over-the-counter allergy medication, for which I have a prescription documented during my free physical, my mileage to and from the dentist and doctor…the list goes on and on. The result is that I save more tax money on items I would be purchasing anyway.

Here’s what I did and how you can too:

• I read the Publication 502 because the amount of time spent grazing over the categories pays off with the tax savings.
• I don’t think much about whether I have enough money in my HSA, I focus more on the expenses.
• When I go to Target or Walgreens, I use the “Health Spending Item” total on the receipt as a guide since they are targeted to FSA users. Starting in 2011, every item had to be programmed to align to the IRS Publication 502 – so if the receipt says it’s eligible, I’m confident it truly can go through my HSA.
• I don’t really care about how much is in my HSA, just whether I record it on my Tango Health Spending Journal so I can pay myself back whenever it’s convenient.

If you’re having a hard time figuring how much you should put in your HSA, think more about what expenses you’ve had since you opened your HSA. And find a good way to keep track of those expenses – I use a SmartPhone to take a picture of the receipt so I remember everything when I finally get around to recording them in my Health Spending Journal.

Now seriously, go see our list of eligible expenses to get you started!