Are COVID Tests HSA Eligible for Reimbursement?

A Health Savings Account (HSA) provides a tax-advantaged savings mechanism designed to assist individuals enrolled in high-deductible health plans (HDHPs) with qualified medical expenses. This account offers a unique opportunity for tax-free growth and tax-free withdrawals when used for eligible healthcare costs. A common question concerns the eligibility of COVID-19 tests for reimbursement from these accounts. Understanding these rules helps individuals manage their healthcare finances.

Eligibility of COVID-19 Tests for HSA Use

For an expense to be HSA-eligible, it must fall under the Internal Revenue Service (IRS) definition of medical care, which includes costs for the diagnosis, cure, mitigation, treatment, or prevention of disease. The IRS has clarified that the cost of COVID-19 home testing is an eligible medical expense, including both at-home rapid antigen tests and PCR tests. This eligibility extends to most out-of-pocket COVID-19 diagnostic tests. These rules align with those for Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs), as these accounts generally follow similar IRS guidelines for qualified medical expenses. Additionally, items like masks, hand sanitizer, and sanitizing wipes are considered eligible medical expenses if their primary purpose is prevention.

Using Your HSA for COVID-19 Tests

You can use your HSA funds for eligible COVID-19 tests through two primary methods: direct payment or reimbursement. The most straightforward approach is using an HSA-specific debit card at the time of purchase, much like a standard debit card, providing immediate access to your pre-tax funds at pharmacies, clinics, or online retailers.

Alternatively, you can pay for the COVID-19 test out-of-pocket using personal funds and then seek reimbursement from your HSA. This process typically involves submitting a claim to your HSA administrator through an online portal or mobile application. You will need to complete a reimbursement request form and provide supporting documentation, such as the original receipt. Reimbursement requests can be submitted at any time, provided the expense was incurred after your HSA was established.

Essential Documentation and Record Keeping

Maintaining accurate and comprehensive records for all HSA transactions, including those for COVID-19 tests, is important for tax purposes and potential audits. The IRS requires account holders to retain documentation proving that distributions were used exclusively for qualified medical expenses. This documentation demonstrates that the funds were not previously paid or reimbursed from another source and were not taken as an itemized deduction on taxes.

A valid receipt for an eligible expense should clearly include the date of purchase, the item or service purchased, the amount paid, and the vendor’s name. It is advisable to keep these records for at least three years from the tax filing date, or as long as your HSA remains open, whichever period is longer. Both physical and digital copies of receipts should be securely stored to ensure you can provide proof of eligibility if requested.

Specific Scenarios and Considerations

Certain situations affect whether COVID-19 tests are eligible for HSA reimbursement. If a COVID-19 test is fully covered by your health insurance plan, you cannot use HSA funds for that expense, as HSA funds are intended for out-of-pocket medical costs not reimbursed by other sources. This prevents “double-dipping.”

Similarly, if you receive free COVID-19 tests from a government program, an employer, or a public health clinic, these tests are not eligible for HSA reimbursement since no personal expense was incurred. Additionally, tests primarily obtained for non-medical purposes, such as travel requirements, may not be considered eligible medical expenses unless they are for diagnosis of symptoms or exposure.