Unexpected medical bills can throw anyone’s budget for a loop. When that person is a friend, it’s natural to think about how you might be able to help deal with the big out of pocket costs.

Using your HSA to help a friend pay for medical costs can be a costly move, as it typically will trigger a big tax bill. That said, there are some potential workarounds that might make it possible for you to help a friend without owing taxes.

The basic rule: Family Only

You can make tax-free withdrawals from an HSA to cover qualified medical expenses for yourself, your spouse and anyone you claim as a dependent on your tax return. That’s it. If you use your HSA to pay for a friend’s medical bills you are going to run into a big IRS bill.

The money you take out of your HSA for a friend will be deemed an “unqualified expense.” That means you will owe income tax on the withdrawal and a 20 percent penalty if you are younger than 65. If you are 65, the 20 percent penalty is waived, though you will owe income tax on what is referred to as a non-qualified withdrawal.

That’s the general rule. But there are a few workarounds that can make it possible to take money out of an HSA tax-free to help a friend with medical expenses.

Workaround 1: Make a withdrawal based on prior bills you paid for out-of-pocket.

If you have been covering your medical expenses from savings or cash flow and letting your HSA account grow, you have the right to withdraw money tax-free based on those old bills that you already paid. The trick is that you must have all the receipts and bills for the qualified medical expenses you paid out of pocket.

For instance, let’s say that over the past three years you paid a total of $3,000 in out of pocket medical expenses rather than tap your HSA. You can now take out $3,000 from your HSA to “cover” those bills you paid, and you will owe no tax on the withdrawal as long as those bills were for qualified medical expenses, and you’ve got the bills and records showing you paid ‘em.

Once you have the money it can used for anything. Home repairs. Paying down credit card debt. Helping a friend.

Workaround 2: Claim a friend as a dependent

The IRS will allow tax-free withdrawals from your HSA if your arrangement with your friend meets the requirements to be claimed as a “qualifying relative” dependent.

There are several qualifications that your friend will need to fulfill in order to be qualified as a dependent:

• Your friend must live with you the entire year.

• Your friend must have gross income below $4,050. (Social Security is not included in that calculation.)

• Your friend can’t file a joint tax return with anyone else.

• You must provide at least 50 percent of the support for your friend.

If that’s at all in the realm of possible, you can learn more about “qualifying relative” status in IRS Publication 501. It also makes sense to check in with a tax pro for some guidance on how this move could impact other parts of your tax life.

Giving rules outside of an HSA

Rather than raid your HSA, you might want to consider using other savings. It’s typically smartest to leave your retirement savings untouched. That’s money you are going to need. But if you have other savings –a plump emergency savings fund or extra cash, you can gift that money to a friend and neither of you will run into any tax bill. If that’s possible, it may make more sense than using your triple-tax-free HSA dollars.

Any individual can give another individual $15,000 in 2019 without any tax, or needing to file any paperwork with the IRS. If your friend has a partner or spouse, you could give him or her another $15,000 without any tax implications.

The reality is that you can give a whole lot more with triggering any taxes.

It’s just that any annual gift of more than $15,000 will require you to report the gift to the IRS when you file your tax return for the year. Don’t worry; this is just a paperwork issue, no tax will be due. The IRS uses your reporting on Tax Form 709 to keep track of your big gifts throughout your life. Based on current tax law, you will only owe tax if your lifetime gifting reported to the IRS is more than $11.4 million.

Moreover, if your gift was that you paid a medical or insurance bill directly, the IRS won’t require you to file Form 709 regardless of how big the bill is. A direct payment to cover someone else’s medical expenses is not counted as part of your lifetime gift exclusion.