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What are Qualified Medical Expenses for HSA, MSA, and FSAs?

By on March 23, 2014 in Health Insurance, Insurance

What are Qualified Medical Expenses for HSA, MSA, and FSAs?If you have the benefit of setting aside pre-tax income into a Health Savings Account (HSA), Archer Medical Savings Account (MSA), or Flexible Spending Account (FSA) you need to know how to safely use that money.

As you might expect with these healthcare specific savings accounts that you cannot use the money on whatever you feel like. You may get a debit card with the account, but the spending has to be on qualified medical expenses.

If you spend the money on unqualified healthcare expenses (or on anything other than qualified medical expenses) not only will you have to pay regular income tax but a penalty on top of that of 20%. That means a $1,000 withdrawal for unqualified spending would cost you $200 in penalty plus another $200 to $300 (20% to 30%) depending on your tax bracket.

However, it isn’t cut and dry as to what is a qualified medical expense. Knowing the list will help you avoid penalties and taxes that you aren’t expecting.

What are Qualified Medical Expenses?

As always it is recommended you check with your health insurance company (or whoever is running your HSA, MSA, or FSA) before spending those pre-tax dollars.

The general rule of thumb when it comes to qualified medical expenses is it must be something that a doctor prescribed or is medically required.

That includes:

  • physical exams
  • prescription medication
  • surgery
  • lodging away from home for medical care
  • diagnostic testing
  • office co-pays
  • prescribed birth control pills
  • hospital bills
  • blood tests
  • acupuncture
  • eyeglasses and contacts
  • wheelchair
  • guide dog

Most of the items you would expect are on the approved list. However, it is even more important to know the things that aren’t covered since that is a shorter list and is the type of spending that will cost your taxes and penalties.

What are Unqualified Medical Expenses?

Here are some of the things that are not covered:

  • nonprescription medication (such as ibuprofen; however, if a doctor prescribes them they are covered)
  • paying for treatments in advance for services you will receive next year
  • cosmetic surgery and procedures
  • funeral and burial expenses
  • maternity clothing
  • health programs offered by resorts
  • swimming pool construction and maintenance costs
  • weight loss programs

Eligible Over-the-Counter Medications

Also, in terms of over-the-counter medications, these are allowed:

  • antacids
  • allergy medicine
  • cough medicine
  • sleep aids

Ineligible Over-the-Counter Medications

And these over-the-counter items are ineligible:

  • toothpaste and other toiletries
  • lip balm
  • vitamins (unless prescribed)
  • fiber supplements

The List Will Change, So Check First

The list is selected by the government and is subject to change at any time. There is some talk that over-the-counter medications like headache medicine that currently require a doctor’s prescription may soon be allowed without a prescription.

Be sure to check with your insurance company or tax professional before using your FSA, MSA, or HSA debit card (or requesting a reimbursement check).

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