For tax purposes, a “Qualified Medical Expense” is mostly what you think, plus a bit more
Being an adult in the U.S. means sometimes dealing with things that are both dull and important, like taxes and medical insurance. Today I focus on the intersection of these: what constitutes a “qualified medical expense” for tax purposes. You’ll want to understand what medical expenses count as “qualified” to take full advantage of possible itemized deductions or tax-favored health plans (such as HSAs and FSAs). There are lots of online resources that explain the tax benefits of these health plans and I’ve written about them in the past, explaining how the tax benefit works and quantifying it in dollars (here for FSAs and here for HSAs).
What qualifies and what doesn’t? Mostly, it’s what you think. I’ll start with some example items you might not know about already and then discuss how you can get additional guidance for specific items.
Example items currently considered qualified medical expenses for tax purposes:
- Acupuncture
- Addiction treatment
- Adult diapers
- Breastfeeding supplies
- Breathing strips
- Chiropractors
- Condoms
- Contact lens cleaning solution
- Co-payments for doctor visits
- Hand sanitizer
- Over the counter medication (no prescription required)
- Menstrual products: tampons, pads, menstrual cups, period underwear
- PPE like masks
- Pregnancy tests
- Premiums for Medicare Part A, Part B, and Part D
- Prenatal vitamins
- Sunscreen with an SPF of 15+
- Transportation that is directly related to receiving medical treatment: mileage, parking fees, and public transportation costs. [Note: I once submitted for reimbursement of a subway pass. I purchased it on the day of a doctor visit, for the purpose of getting to that appointment. I also submitted the insurance EOB form that appointment, but my FSA administrator denied my transit reimbursement. I did not follow up as I was going to empty my FSA that year with other qualified expenses, but I was irked as it was indeed a qualified expense!]
Example items currently qualified only with a letter of medical necessity (“LMN”) or prescription from a doctor (if someone tells you about “surprising” qualified medical expenses, do verify the info and check whether they require an LMN or prescription):
- Air purifiers
- Electric toothbrush
- Essential oils
- Gym memberships
- Sleep quality and wellness trackers
- Weight loss programs
Example items currently not qualified medical expenses:
- Insurance premiums you pay for employer-provided health insurance (those already gets tax-advantaged treatment as non-taxable compensation)
- Child care to facilitate your own medical treatment
- Diaper service
- Funerals
- Medical marijuana
- Supplements and vitamins (except for prenatal vitamins)
If you’re not sure whether something qualifies, you could check out
- IRS Publication 502, which provides some general guidance about “medical expenses” and has 10 pages listing example expenses that do qualify and 2 pages listing those that do not.
- A helpful IRS FAQ page.
- This pretty expansive list of eligible items from Cigna
- Online stores like HSAstore.com are also helpful in identifying what qualifies, but do shop around for best prices.
This is all far more complicated than necessary, but I would still like you to get these tax advantages where you can. Next week I’ll write about some practical considerations for using FSAs and HSAs, and tracking medical expenses in general. There’s an initial learning curve for this, but then you can reap the benefits year after year.
– Stephanie
Frequently Taxed Questions 