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Health Savings Account (HSA) & IRC 213(d) Qualified Medical Expenses

Tax Deductible Contributions and Tax-Free Benefits

For 2012, the IRS allows a maximum contribution of $3,100 for single coverage and $6,250 for family coverage. Accountholders age 55+ can make an additional $1,000 annual catch-up contribution[1] The money you contribute to your HSA is tax-deductible and all benefits are tax-free when paying for qualified medical expenses for yourself, your spouse and any dependents. Once you contribute money to an HSA, you can use the funds to pay for qualified medical expenses now, or save the money for use in future years.

 

What expenses qualify for tax-free reimbursement from my HSA?

Internal Revenue Code Section 213(d) states that eligible expenses must be made for “medical care.” This is defined as amounts paid for the “diagnosis, cure, mitigation, treatment or prevention of disease, or for the purpose of affecting any structure or function of the body.” Qualified medical expenses are eligible for reimbursement through your HSA as long as they are not reimbursed through insurance or other sources.

 

Examples of qualified medical expenses

  • Acupuncture
  • Alcoholism treatment
  • Ambulance services
  • Artificial limb or prosthesis
  • Artificial teeth
  • Birth control pills
  • Car adaptations for a disabled person
  • Chiropractors
  • Christian science practitioners
  • Contact lenses
  • Crutches
  • Dental treatment (other than cosmetic)
  • Diagnostic devices (i.e. blood sugar test kit)
  • Doctor’s fees
  • Drug addiction treatment
  • Eyeglasses (including eye examinations)
  • Eye surgery (including laser eye surgery)
  • Fertility (including in-vitro fertilization)
  • Guide dog
  • Hearing aids and hearing aid batteries
  • Hospital services including meals and lodging
  • Insulin
  • Laboratory fees
  • Lactation assistance supplies
  • Prescription medicines or drugs
  • Nursing home
  • Nursing services
  • Operations or surgery
  • Psychiatric care
  • Psychologist
  • Telephone equipment for hearing-impaired
  • Telephone equipment for visually-impaired
  • Therapy or counseling
  • Transplants
  • Transportation for medical care
  • Vasectomy
  • Wheelchair
  • X-ray 


Insurance Premiums and Qualified Medical Expenses

  • Continuation coverage under federal law (i.e., COBRA)
  • Qualified long-term care insurance contract
  • Any health plan maintained while an individual is receiving unemployment compensation under federal or state law
  • For accountholders age 65 and over, premiums for any health insurance (including Medicare and Medicare Part D premiums) other than a Medicare supplemental policy

 

Expenses that DO NOT qualify for HSA reimbursement:

  • Babysitting, childcare, and nursing services for a normal, healthy baby
  • Cosmetic surgery
  • Dancing lessons
  • Diaper service
  • Electrolysis or hair removal
  • Funeral expenses
  • Hair transplant
  • Health club dues
  • Household help
  • Illegal operations and treatments
  • Maternity clothes
  • OTC medications (without prescription)
  • Personal use items
  • Swimming lessons
  • Teeth whitening
  • Vacation or travel
  • Veterinary fees
  • Weight loss programs for improvement of appearance, general health, or sense of well-being

Important reminders about qualified medical expenses

  • Save your receipts and prescriptions for OTC medicines for tax purposes.
  • If an HSA reimbursement is not for a qualified medical expense, you will incur income tax and a 20 percent penalty on the amount used.
  • As the HSA owner, you are ultimately responsible for determining whether a healthcare expense is eligible for reimbursement from your HSA.

 


[1] Tax references are at the federal level. State taxes may vary. Please consult a tax advisor. The examples and requirements stated in this flyer are subject to change by the IRS.
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