Can an HSA Be Used for a Gym Membership?

A Health Savings Account (HSA) is a tax-advantaged savings account designed to help individuals cover qualified medical expenses. These accounts are available to those enrolled in high-deductible health plans. A common question arises regarding the use of HSA funds for gym memberships, as many people seek to maintain or improve their health through exercise.

General Eligibility for Gym Memberships

Gym memberships are not considered qualified medical expenses by the Internal Revenue Service (IRS). The IRS defines “medical care” for HSA purposes as expenses for the diagnosis, cure, mitigation, treatment, or prevention of disease. Expenses for general health improvement or exercise, without a specific medical necessity, do not meet this definition. Therefore, HSA funds cannot be used for a standard gym membership intended for overall well-being.

Conditions for Qualified Gym Membership Expenses

A gym membership can be a qualified medical expense under specific circumstances. This occurs when the membership is medically necessary to treat a particular medical condition or disease. For example, if a physician prescribes a gym membership as part of a treatment plan for a diagnosed condition like obesity, hypertension, heart disease, or for physical therapy following an injury, it may qualify. The gym program or facility must directly address the diagnosed condition.

The IRS applies a “but for” test, meaning the expense would not have been incurred “but for” the medical condition. This means the gym membership must be an integral component of a prescribed medical treatment, not merely a recommendation for general fitness. A weight-loss program with gym access may qualify if it specifically treats a diagnosed condition like obesity or diabetes.

Documentation and Reimbursement Procedures

When a gym membership meets the criteria for a qualified medical expense, proper documentation is essential. Account holders must obtain a letter of medical necessity from a physician. This letter should clearly state the diagnosed medical condition and explain how the gym membership is necessary for treatment. It must also confirm the membership’s sole purpose is to affect a body structure or function, or treat a specific disease.

Once medical necessity is established, HSA funds can be used for reimbursement. This can involve using an HSA debit card for direct payment or paying out-of-pocket and submitting a reimbursement request. Retain all receipts and the letter of medical necessity, as these records substantiate the expense for IRS purposes. The expense must have been incurred after the HSA was established to be eligible for reimbursement. There is no time limit for when an individual can reimburse themselves for qualified expenses, provided the HSA was open when the expense occurred.

Tax Implications of Non-Qualified Use

Using HSA funds for expenses that do not meet the IRS definition of a qualified medical expense carries tax implications. If an HSA distribution is used for a non-qualified expense, the withdrawn amount is subject to ordinary income tax. This means the funds are treated as regular income and taxed at the individual’s marginal tax rate.

In addition to income tax, a 20% penalty tax is imposed on non-qualified distributions if the account holder is under age 65. For example, a $500 non-qualified withdrawal would incur a $100 penalty. The penalty does not apply if the account holder is age 65 or older, disabled, or in the event of death. Maintaining compliance with IRS guidelines is important to avoid these taxes and penalties.