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Health Savings Accounts 101 (HSA)

"Medical expenses" For Purposes Of An HSA

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The key to whether an expense is a "medical expense" for HSA purposes is whether an expense is for “medical care.” It also depends on who incurs the expense.

Medical Expenses

To be an expense for medical care, the expense has to be primarily for the diagnosis, cure, mitigation, treatment, prevention or alleviation of a physical or mental defect or illness. The determination often hangs on the word “primarily,” which depends on all the relevant facts and circumstances. 

As a general matter, the following distributions are for medical care for HSA purposes:

  • Medical expenses that are not reimbursed by your High Deductible Health Insurance Plan (HDHP.)
  • The cost of meals and lodging at a hospital or similar institution if a principal reason for being there is to receive medical care. 
  • Amounts paid for qualified long-term care services. 
  • A portion of the premiums paid for qualified long-term care insurance contracts.
  • Over the counter drugs if you have a prescription from a doctor.
  • The money that Social Security withholds from your benefits to pay for Mediare Part B.
  • The money used to pay Medicare Part D or Medicare Advantage premiums - but not medigap premiums.

The following distributions are generally not considered to be for medical care:

  • Membership in an athletic club or gym.
  • Funeral expenses.
  • The cost of diet foods or beverages.
  • Over the counter drugs unless you have a doctor's prescription.

There are special rules for insurance premiums. Generally, you cannot treat insurance premiums as medical expenses for HSA purposes. However, you can treat the following premiums as qualified HSA medical expenses: 

  • Long-term care coverage (subject to limits based on age. The limits are adjusted annually.)
  • Health care coverage while you receive unemployment benefits
  • Health care continuation coverage required under any federal law
  • If you are age 65 or older, you can treat insurance premiums as a medical expense (other than the premiums for a Medicare supplemental policy such as Medigap)

For additional information about medical expenses for purposes of an HSA, click here.

Qualified medical expenses include those incurred by:

  • Yourself.
  • Your spouse.
  • Any dependent you claim on your tax return.
  • Any person you could have claimed as a dependent for tax purposes except that:
    • The person filed a joint return
    • The person had a gross income of $3,300 or more, or
    • You, or your spouse if filing jointly, could be claimed as a dependent on someone else's return for the year in question.

NOTE: The definition of medical expenses for income tax purposes is not necessarily the same as for HSA purposes. For a list of specific expenses which do and do not qualify for tax purposes, click here

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