What expenses are eligible for tax-free distributions from my Health Savings Account?
A. You can reimburse tax-free most Section 213(d) medical expenses. The term “Section 213(d) expenses” refers to the part of the Internal Revenue Code that defines the items that receive tax-favored status – either they are eligible for a tax deduction to the extent that they exceed 10% of your adjusted gross income or are eligible for tax-free reimbursement through a Health Flexible Spending Arrangement, Health Reimbursement Arrangement or Health Savings Account.
The IRS doesn’t publish an exhaustive list of all tax-advantaged items. A close proxy is IRS Publication 502 Medical and Dental Expenses, which lists and defines all items eligible for the tax deduction. The list is almost identical to the list of items you can reimburse tax-free from an HSA (though it’s not an exact match; insurance premiums, for example, are listed as eligible expenses in Publication 502, but only certain insurance premiums in certain circumstances are eligible for tax-free reimbursement from an HSA – see below).
In general, the list of eligible expenses includes:
Your financial responsibility for medical services covered by your health plan
Other medically necessary services that your health plan may not cover
Insulin and diabetic supplies
Over-the-counter medical supplies and equipment
Over-the-counter drugs and medicines (only with a valid prescription)
Health insurance premiums when you continue coverage through COBRA or are collecting federal or state unemployment insurance
Medicare premiums (Parts B, C and D) if you are age 65 or older (but not for Medigap insurance premiums)
Employer-based retiree health insurance premiums if you are age 65 or older
Long-term care insurance premiums, subject to certain limitations