Can I Use My HSA for Finasteride?

Health Savings Accounts (HSAs) serve as tax-advantaged savings vehicles designed to help individuals manage healthcare costs. These accounts allow for pre-tax contributions, tax-free growth through investments, and tax-free withdrawals for qualified medical expenses. Understanding the specific criteria for eligible expenses helps ensure compliance with Internal Revenue Service (IRS) regulations, avoiding potential penalties.

What Qualifies as an HSA-Eligible Expense

The Internal Revenue Service (IRS) defines “medical care” for HSA purposes as amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, and for affecting any structure or function of the body. This includes fees for doctor visits, prescription medications, dental care, vision services, and diagnostic tests. Since 2020, qualified medical expenses also include over-the-counter medications without a prescription and menstrual care products.

An expense must primarily be for medical care, not general health improvement or cosmetic purposes. For example, costs for general health items like vitamins or health club memberships are generally not eligible unless prescribed to treat a specific medical condition. Purely cosmetic procedures, such as elective hair removal or teeth whitening, typically do not qualify unless they address a deformity arising from a congenital abnormality, injury, or disfiguring disease.

If an item or service provides a general health benefit but is not directly tied to treating a specific illness or condition, it is unlikely to be considered a qualified medical expense. Account holders should confirm that an expense aligns with IRS guidelines before using HSA funds.

Determining Finasteride Eligibility

Finasteride, a prescription medication, can be considered an HSA-eligible expense when prescribed for a legitimate medical condition. It is commonly used to treat benign prostatic hyperplasia (BPH), an enlarged prostate, and male pattern hair loss, also known as androgenetic alopecia. When Finasteride is prescribed for BPH, it is generally a qualified medical expense because it addresses a specific disease that affects the function of the body.

However, the eligibility of Finasteride for hair loss treatment presents a nuanced situation. While it is a prescription medication, hair regrowth treatments are often considered cosmetic if their sole purpose is to enhance appearance.

For Finasteride used for hair loss to be HSA-eligible, it typically requires a Letter of Medical Necessity (LMN). An LMN is a formal document from a licensed healthcare provider that attests to the medical necessity of a treatment, product, or device. This letter is crucial when an expense could serve both a medical and a personal or cosmetic purpose.

The LMN should provide specific details, including the patient’s name, diagnosis, a description of the medical condition, and a clear explanation of why the Finasteride treatment is medically necessary to alleviate or prevent a physical or mental defect or illness. It explicitly states the treatment is not for general health or cosmetic enhancement. This documentation helps demonstrate that the hair loss is considered a medical condition, such as severe alopecia, rather than simply male pattern baldness for aesthetic reasons.

This letter serves as documentation for the HSA administrator or the IRS in the event of an audit. Account holders are responsible for maintaining all records, including prescriptions, receipts, and any necessary LMNs, to prove eligibility if requested by the IRS. Failure to provide proper documentation can result in the expense being deemed ineligible, leading to taxes and a 20% penalty on the withdrawn amount.