Importance of Qualified Expenses
When a Health Savings Account (HSA) distribution is used to pay for "Qualifying Medical Care Expenses" of the account beneficiary, his or her spouse, or dependent children, the distribution is excluded from gross income.
What are Qualified Expenses?
We provide the most common examples below, and you will find the IRS's descriptions of Qualifying Medical Care Expenses at http://www.irs.gov/pub/irs-pdf/p502.pdf.
You should also understand the following about Qualifying Medical Care Expenses:
- Health care expenses are qualified only to the extent they are not reimbursed by insurance or otherwise.
- Qualified Medical Care Expenses must be incurred after the HSA has been established.
Examples of Qualifying Health Care Expenses
Some examples of health care expenses that are eligible for HSA reimbursement:
- Medicine, drugs, birth control pills, and vaccines that your doctor prescribes and that are FDA approved.
- Non-prescription medications
- Medical doctors, dentists, eye doctors, chiropractors, osteopaths, podiatrists, psychiatrists, psychologists, physical therapists, acupuncturists and psychoanalysis (medical care only)
- Medical Exams, x-ray and laboratory services, insulin treatment and whirlpool baths the doctor prescribed
- Nursing help. If you pay someone to do both nursing and housework, you can be reimbursed only for the cost of the nursing help.
- Hospital care (including meals and lodging), clinic costs and lab fees
- Medical treatment at a center for substance abuse.
- Medical aids such as hearing aids (and batteries), false teeth, eyeglasses, contact lenses, braces, orthopedic shoes, crutches, wheelchairs, guide dogs and the cost of maintaining them
- Ambulance service and other travel costs to get medical care. If you use your own care, you can claim what you spend for gas and oil to go to and from the place you received the
care; or your can claim 10 cents a mile.; Add parking and tolls to the amount you claim under either method.
Some Insurance Premium Qualifies
Some insurance premiums are considered Qualifying Medical Care Expenses:
- Qualified long-term care insurance
- COBRA health care continuation coverage
- Health care coverage while an individual is receiving unemployment compensation
- For individuals over age 65 -- premiums for Medicare A or B, Medicare HMO, an the employee share of premium for employer-sponsored health insurance
Expenses that don't Qualify
The following are NOT qualified expenses under your HSA:
- Health insurance premiums other than those listed above, including Medigap policies
- Life insurance or income protective policies
- The hospital insurance benefits tax, withheld from you pay as part of the Social Security tax or paid as part of Social Security self-employment tax
- Nursing care for a healthy baby
- Illegal operations or drugs
- Travel your doctor told you to take for rest or change
- Cosmetic surgery
- Teeth Bleaching
If you are considering an HSA distribution for an expense not addressed here, consult your tax advisor or refer to the IRS guidelines.