Can I Use My Health Savings Account Internationally?

A Health Savings Account (HSA) is a tax-advantaged savings vehicle for qualified medical expenses. These accounts offer a triple tax advantage: contributions are tax-deductible, funds grow tax-free, and withdrawals for eligible healthcare costs are also tax-free. Generally, you can use your HSA funds for medical expenses incurred internationally, but specific considerations apply to ensure compliance and smooth transactions.

Understanding HSA Eligibility for International Expenses

The Internal Revenue Service (IRS) defines “qualified medical expenses.” This definition remains consistent regardless of where medical services are received. IRS Publication 502 outlines these eligible expenses, which include costs for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for treatments affecting any part or function of the body.

Common qualified medical expenses include physician visits, hospital stays, prescription medications, dental care, and vision care. Medical equipment and supplies, such as crutches or contact lenses, also qualify. However, for prescription drugs purchased abroad, they must be legal in both the foreign country and the United States, and intended for consumption while you are in the foreign country.

Certain expenses are not considered qualified medical expenses. These include costs for general health benefits, such as vitamins or a vacation, unless prescribed for a specific medical condition. Cosmetic procedures are generally ineligible unless necessary to correct a deformity resulting from a congenital abnormality, personal injury, or disfiguring disease. General travel insurance, which does not specifically cover medical care, also falls outside the scope of eligible HSA expenses.

Documentation and Reimbursement for International Medical Costs

Meticulous record-keeping is crucial when using HSA funds for international medical costs, primarily for substantiation in case of an IRS audit. While you may not submit documentation to your HSA administrator for every transaction, you are responsible for proving the eligibility of any expense. This includes retaining itemized receipts from the foreign provider, which should clearly describe the services rendered or products purchased.

Proof of payment, such as credit card statements or bank records, should also be kept. The documentation should ideally include the name and address of the foreign medical provider. If the original documents are not in English, it is advisable to obtain a translation, although the IRS does not explicitly require this for all cases. These records demonstrate that the expense was indeed a qualified medical expense and not previously reimbursed from another source.

When converting foreign currency expenses into U.S. dollars, use a reasonable exchange rate from the date the service was provided or payment was made. This ensures accuracy in recording the U.S. dollar equivalent of the expense. If you paid out-of-pocket, you can submit a claim for reimbursement to your HSA administrator by transferring funds from your HSA to your personal checking or savings account.

Handling Currency and Payments Abroad

Using your HSA debit card directly with foreign providers can present challenges. While many HSA debit cards carry a Visa or Mastercard logo, indicating broad acceptance, some foreign medical facilities may not accept them. Furthermore, using your HSA debit card internationally may incur foreign transaction fees, typically ranging from 1% to 3% of the transaction amount, similar to other credit or debit cards.

A common and often more practical approach is to pay for the international medical expense out-of-pocket using a personal credit card or cash. Subsequently, you can reimburse yourself from your HSA once you return home or at a later convenient time. This method allows you to avoid potential acceptance issues and provides flexibility in managing foreign currency transactions.

Foreign exchange rates directly impact the U.S. dollar value of your medical expenses incurred abroad. It is important to note the exchange rate on the specific date of service or payment to ensure accurate record-keeping for reimbursement and tax purposes. Checking with your specific HSA administrator about their policies regarding international transactions and foreign currency conversions can help you understand any unique requirements or limitations.