Are Cough Drops an HSA-Eligible Medical Expense?
Uncover the specifics of using your Health Savings Account for everyday remedies like cough drops. Navigate HSA eligibility for common over-the-counter items.
A Health Savings Account (HSA) offers a tax-advantaged way to save for and pay for qualified medical expenses. These accounts are designed to help individuals cover healthcare costs with pre-tax contributions, tax-free growth, and tax-free withdrawals for eligible expenses. This article clarifies the eligibility of cough drops for HSA reimbursement.
General HSA Eligibility for Medical Expenses
A “qualified medical expense” is generally defined by Internal Revenue Service (IRS) guidelines in IRS Publication 502. These expenses must be primarily for the diagnosis, cure, mitigation, treatment, or prevention of disease. They can also cover costs for treatments affecting any structure or function of the body.
Common examples of eligible expenses include payments for doctor visits, prescription medications, and hospital stays. Dental care, vision care, and certain medical equipment also fall under this broad definition. These guidelines ensure HSA funds are used for legitimate healthcare needs.
Specific Rules for Over-the-Counter Products
Prior to a significant change in tax law, over-the-counter (OTC) medicines and drugs typically required a prescription for HSA reimbursement, meaning a doctor’s note was needed for items like pain relievers or cold medications. This requirement created an administrative hurdle.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted on March 27, 2020, permanently removed this prescription requirement for OTC medicines and drugs. This change was made retroactive to January 1, 2020, simplifying the process for using HSA funds. As a result, many common OTC products are now HSA-eligible.
Cough Drops and Related Cold/Flu Items
Following the changes introduced by the CARES Act, cough drops are now considered an eligible over-the-counter medicine or drug for HSA reimbursement. This expanded eligibility extends to a wide range of common cold and flu items.
Other cold and flu products that are now HSA-eligible include pain relievers, fever reducers, and decongestants. Multi-symptom cold medicines, nasal sprays, and sore throat sprays are also included. These items are considered eligible because they treat a diagnosable medical condition, such as symptoms caused by viral infections.
Documentation and Substantiation
Maintaining proper records is important for all HSA-eligible purchases, including over-the-counter items like cough drops. While a prescription is generally no longer required for most OTC medications, retaining itemized receipts is still necessary. These records serve as proof that funds were used for qualified medical expenses.
An itemized receipt should clearly display the date of purchase, a description of the item, the amount paid, and the name of the store. In the event of an IRS audit, these records are important for proving that HSA distributions were used for eligible expenses. Retain these records for a minimum of three years from the tax filing date.