Are CPAP Supplies a Covered HSA Expense?

Health Savings Accounts (HSAs) offer a tax-advantaged way for individuals to save and pay for qualified medical expenses. These accounts work with high-deductible health plans to help manage healthcare costs. For individuals managing conditions like sleep apnea, understanding how to use an HSA for Continuous Positive Airway Pressure (CPAP) therapy supplies is important.

Understanding Qualified Medical Expenses

A “qualified medical expense” refers to costs for medical care as defined by Internal Revenue Code Section 213(d). These expenses must be primarily for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any structure or function of the body. Examples include payments for services by physicians, surgeons, and dentists, as well as the costs of equipment and supplies necessary for medical care.

Costs that are merely beneficial to general health, such as vitamins not prescribed for a specific medical condition, do not qualify. The Internal Revenue Service (IRS) provides detailed guidance on qualified medical expenses in publications like IRS Publication 502.

Specific CPAP Items and Requirements

CPAP machines and their associated supplies are considered qualified medical expenses under IRS guidelines. They are medical devices used for the treatment of sleep apnea, a recognized medical condition.

Specific CPAP items that qualify include the main CPAP unit, masks, tubing, humidifiers, and filters. Other accessories such as headgear, cushions, and cleaning supplies specifically designed for CPAP equipment are also eligible. To ensure these expenses are qualified, a valid prescription from a doctor is required, validating the medical necessity of the items. This prescription serves as documentation that the equipment is for the treatment of a diagnosed condition, aligning with IRS requirements for medical equipment.

Using Your HSA for CPAP Expenses

Utilizing your HSA for CPAP expenses involves direct payment or reimbursement. Many HSA providers issue a debit card linked to the account, allowing for direct payment at the point of purchase for eligible medical expenses. This method offers immediate access to funds and simplifies transactions. Retain receipts for all transactions made with an HSA debit card, as these expenses may be subject to IRS review.

Alternatively, you can pay for CPAP supplies out-of-pocket and then reimburse yourself from your HSA. This approach provides flexibility, allowing you to pay for expenses when they occur and withdraw funds from your HSA later. To claim reimbursement, you will submit a claim to your HSA administrator, providing documentation such as the receipt, date of service, a description of the expense, and the amount. While you can submit an expense for reimbursement at any time, even years after the expense was incurred, proper documentation from the year the claim was made is necessary.

Record Keeping for Tax Purposes

Maintaining thorough records for all HSA-related medical expenses, including CPAP supplies, is important. You are responsible for proving that distributions from your HSA were for qualified medical expenses in the event of an IRS audit. This documentation serves as proof that the funds were used in accordance with tax laws.

Key documents to keep include itemized receipts, invoices, and Explanation of Benefits (EOB) statements from your health insurer. Additionally, the doctor’s prescription or a letter of medical necessity (LMN) for your CPAP equipment is important to retain. These records should be kept for at least three years from the tax filing deadline, as this is the period during which the IRS can audit your tax return. Without proper documentation, ineligible expenses may be subject to income tax and a 20% penalty if you are under age 65.