Can I Use My HSA for Fertility Treatments?

Health Savings Accounts (HSAs) offer a tax-advantaged way to save and pay for qualified medical expenses. Many people exploring fertility options wonder if their HSA funds can be applied toward the significant costs of these treatments. This article clarifies which fertility-related costs are considered qualified medical expenses and outlines the practical steps for utilizing an HSA to cover these expenditures.

Understanding Qualified Fertility Expenses

The Internal Revenue Service (IRS) defines qualified medical expenses as costs for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any body structure or function. For fertility treatments, this includes procedures and services addressing an inability to have children. IRS Publication 502 provides guidance on what constitutes a qualified medical expense.

In vitro fertilization (IVF) procedures are qualified medical expenses. This includes stages like egg retrieval, embryo transfer, and associated laboratory services such as sperm washing and monitoring. Intrauterine insemination (IUI), another common fertility treatment, and its related procedures are also eligible expenses. These treatments address a medical condition impacting the body’s ability to conceive.

Fertility medications prescribed by a medical professional, such as hormones and ovulation induction drugs, are covered expenses. Diagnostic tests, which identify infertility causes, also qualify. These include blood tests, ultrasounds, and semen analysis. Consultations with fertility specialists, including reproductive endocrinologists, are eligible as they contribute to the diagnosis and treatment plan.

Cryopreservation of eggs, sperm, or embryos is a qualified expense if for future medical use by the account holder or spouse. Surgeries performed to correct blockages or other physical issues contributing to infertility are also covered. Acupuncture or other complementary therapies may be eligible if prescribed by a medical professional for a specific medical condition related to fertility. Fees for obtaining sperm or ova, whether through a donor or a fertility clinic, are eligible expenses when part of a medically necessary treatment plan for the account holder or spouse.

How to Use Your HSA for Fertility Treatments

Once a fertility expense is qualified, common methods exist for using HSA funds. The most direct method involves using an HSA debit card for direct payment at the time of service, such as at a fertility clinic or pharmacy. Funds are immediately deducted from the HSA balance, simplifying the payment process.

Another common approach is to pay for the medical expense out-of-pocket and then reimburse oneself from the HSA. This method offers flexibility, especially if the HSA balance is low or if the account holder prefers to let funds grow tax-free. Reimbursement can be requested days, months, or even years after the expense was incurred, provided the HSA was established before the expense date. To initiate reimbursement, individuals log into their HSA administrator’s online portal, enter expense details, and select a method. Funds can be transferred directly to a linked bank account or a check can be issued.

Maintaining meticulous records is a requirement for all HSA transactions, whether paying directly or seeking reimbursement. Account holders should retain receipts, invoices, and any Explanation of Benefits (EOBs) from their health insurance. For fertility treatments, keep doctor’s notes or prescriptions linking the expense to a medical condition, as this proves qualification. These records are essential for potential IRS audits, where the burden of proof for qualified expenses rests with the account holder. Digital storage of these documents is recommended for easy access and organization.

Important Considerations for HSA Use

While HSAs provide a valuable resource for covering fertility treatment costs, understand which expenses are not qualified. Expenses not primarily for medical care, such as elective cosmetic procedures without medical necessity, are not covered. General health supplements not specifically prescribed for a medical condition related to fertility are also ineligible. Travel expenses, unless primarily for medical care, such as mileage and lodging to obtain treatment, are not qualified.

Certain third-party expenses related to fertility treatments are not qualified. For example, expenses for a surrogate mother are not eligible unless the surrogate is the HSA holder and the expense is for her medical care. Fees paid to sperm or egg donors are not qualified unless the donation is specifically for the HSA holder’s or spouse’s medical treatment. These distinctions emphasize that the expense must directly benefit the HSA holder, their spouse, or a qualified dependent’s medical condition.

Using HSA funds for non-qualified expenses carries tax implications. If funds are withdrawn for non-medical purposes before age 65, the amount is subject to ordinary income tax. In addition to income tax, a 20% penalty tax is applied to the non-qualified distribution. This penalty discourages misuse of these tax-advantaged accounts. After age 65, withdrawals for non-qualified expenses are subject to income tax but are exempt from the 20% penalty.

HSA eligibility is tied to enrollment in a High Deductible Health Plan (HDHP) and other specific IRS criteria. While HSA funds can continue to be used for qualified medical expenses even if an individual is no longer covered by an HDHP, new contributions cannot be made. Given the complexities of tax regulations and medical expense eligibility, consulting with an HSA administrator, tax professional, or financial advisor is advisable. These professionals can provide guidance and ensure compliance with current IRS rules, particularly for unique or intricate situations.