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Posted October 1, 2019

What Counts as a Qualified Medical Expenses under an HSA?

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Which medical expenses can you use your health savings account (HSA) to pay for? Which are off limits?

It’s a great question, and one whose answer did change earlier this year—to the healthcare consumer’s advantage: In July, the IRS announced it had expanded the list of HSA-eligible medicines and services for preventative care of chronic diseases. This reflects the work of the Treasury Department and the Internal Revenue Service (IRS) to increase the use and flexibility of HSAs and high-deductible health plans (HDHPs).

Of course, consumers covered by an HDHP can establish and deduct contributions to an HSA as long as they have no disqualifying health coverage. An HDHP generally doesn’t provide benefits for any year until the minimum deductible for that year has been met. However, HDHPs are not required to have a deductible for preventive care.

While you will find that you can use your HSA to pay tax-free for some surprising things—so it’s good to run through the full list of eligible expenses—the IRS offers us a straightforward description of what you can consider a “qualified medical expense”:

 

What does the IRS consider a ‘qualified medical expense’?

  • WHAT: Per the IRS, a medicine or drug will be a qualified medical expense for HSA purposes only if the medicine or drug: requires a prescription; is available without a prescription (an over-the-counter medicine or drug) and you get a prescription for it; or is insulin. Non-prescription medicines (other than insulin) aren’t considered qualified medical expenses for HSA purposes.
  • WHEN: Furthermore, medical expenses incurred before you establish your HSA aren’t qualified medical expenses. If, under the last-month rule, you are considered to be an eligible individual for the entire year for determining the contribution amount, only those expenses incurred after you actually establish your HSA are qualified medical expenses.
  • WHO: Qualified medical expenses are those incurred by the following persons: you and your spouse; all dependents you claim on your tax return; and any person you could have claimed as a dependent on your return except that the person filed a joint return; had gross income of $4,150 or more; or you, or your spouse if filing jointly, could be claimed as a dependent on someone else’s 2018 return. A child of parents who are divorced, separated or living apart for the last six months of the calendar year is treated as the dependent of both parents whether or not the custodial parent releases the claim to the child’s exemption.

 

HSA-eligible medical expenses

This list does not represent all covered medical expenses, but includes the most common:

  • Acupuncture
  • Alcoholism
  • Ambulance
  • Annual Physical Examination
  • Artificial Limb
  • Artificial Teeth
  • Bandages
  • Birth Control Pills
  • Body Scan
  • Braille Books and Magazines
  • Breast Pumps and Supplies
  • Breast Reconstruction Surgery
  • Capital Expenses
  • Car
  • Chiropractor
  • Christian Science Practitioner
  • Contact Lenses
  • Crutches
  • Dental Treatment
  • Diagnostic Devices
  • Disabled Dependent Care Expenses
  • Drug Addiction
  • Drugs
  • Eye Exam
  • Eyeglasses
  • Eye Surgery
  • Fertility Enhancement
  • Founder’s Fee
  • Guide Dog or Other Service Animal
  • Health Institute
  • Health Maintenance Organization (HMO)
  • Hearing Aids
  • Home Care
  • Home Improvements
  • Hospital Services
  • Insurance Premiums
  • Intellectually and Developmentally Disabled, Special Home for
  • Laboratory Fees
  • Lactation Expenses
  • Lead-Based Paint Removal
  • Learning Disability
  • Legal Fees
  • Lifetime Care—Advance Payments
  • Lodging
  • Long-Term Care
  • Meals
  • Medical Conferences
  • Medical Information Plan
  • Medicines
  • Nursing Home
  • Nursing Services
  • Operations
  • Optometrist
  • Organ Donors
  • Osteopath
  • Oxygen
  • Physical Examination
  • Pregnancy Test Kit
  • Prosthesis
  • Psychiatric Care
  • Psychoanalysis
  • Psychologist
  • Special Education
  • Sterilization
  • Stop-Smoking Programs
  • Surgery
  • Telephone
  • Television
  • Therapy
  • Transplants
  • Transportation
  • Trips
  • Tuition
  • Vasectomy
  • Vision Correction Surgery
  • Weight-Loss Program
  • Wheelchair
  • Wig
  • X-ray

 

For more insights about HSAs, download our consumer report here and join us in participating in the first annual HSA Awareness Day on Oct. 15, 2019. For more information, visit www.hsaday.com.

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