Can I Use My HSA for Genetic Testing?

A Health Savings Account (HSA) functions as a tax-advantaged savings account designed for healthcare expenses. These accounts offer individuals a way to save and pay for qualified medical costs with tax benefits. As medical science advances, particularly in genetic testing, many explore how these services integrate with their healthcare financial tools.

This article clarifies when genetic testing expenses are eligible for HSA use. It will detail the criteria established by tax authorities and provide guidance on necessary documentation. Understanding these guidelines helps maximize HSA benefits when considering genetic testing.

Genetic Testing as a Qualified Medical Expense

For an expense to be eligible for reimbursement through an HSA, it must meet the Internal Revenue Service (IRS) definition of a “qualified medical expense.” This definition, outlined in Internal Revenue Code Section 213, includes costs for diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any body structure or function. Genetic testing can fall under this, but eligibility depends on the test’s purpose.

The primary determinant for genetic testing eligibility is medical necessity. Tests directly related to health assessments and serving a clear medical purpose are qualified expenses. Diagnostic tests to identify a specific disease or condition are eligible. This extends to predictive or pre-symptomatic genetic tests determining an increased likelihood of developing certain diseases, especially with a strong medical indication or family history of a specific condition.

Tests guiding treatment for existing diseases, such as pharmacogenomic testing (which helps determine how an individual’s body processes certain medications), also qualify. Carrier testing, which identifies if an individual carries a gene mutation linked to a disease that could be passed to children, is eligible, particularly for those with a family history of specific inherited diseases. The BRACAnalysis test for BRCA1/BRCA2 mutations is covered due to its medical relevance in assessing cancer risk.

Conversely, genetic tests performed purely for general wellness, curiosity, or ancestry without a specific medical diagnosis or recommendation are not qualified medical expenses. A test solely providing information about ethnic background or distant relatives would not be HSA-eligible. The IRS views these services as not primarily for medical care, distinguishing them from tests aimed at preventing or treating a diagnosed or imminent disease.

When a genetic testing service bundles medical and non-medical components, such as health risk assessments and ancestry information, only the portion of the cost attributable to the medical assessment is eligible. The individual must use a reasonable method to allocate the price between qualified medical and non-medical services. This ensures HSA funds are exclusively used for expenses meeting the IRS definition of medical care.

Establishing medical necessity requires a recommendation or prescription from a healthcare professional, such as a doctor. This documentation, sometimes called a Letter of Medical Necessity (LMN), substantiates that the genetic test is for diagnosis, cure, mitigation, treatment, or prevention of a disease. Having a doctor’s endorsement strengthens the case for HSA eligibility.

Required Documentation for Reimbursement

You must retain records to substantiate that distributions from your HSA were for qualified medical expenses. This documentation is for audit purposes.

The primary documentation is proof of payment, such as an itemized receipt or invoice from the genetic testing provider. This document should display the date of service, a description of the expense, and the amount paid. It serves as evidence of the expenditure and its nature.

For genetic tests with both medical and non-medical applications, or when medical necessity is not obvious, a Letter of Medical Necessity (LMN) from a licensed healthcare provider is needed. This letter should state the diagnosed medical condition necessitating the genetic test, detail the specific test recommended, and explain how it will contribute to the diagnosis, treatment, or prevention of the condition. It should also specify that the test is not for general health, cosmetic, or informational purposes unrelated to a medical condition.

If a portion of the genetic testing cost was covered by your health insurance, an Explanation of Benefits (EOB) statement from your insurer is necessary. The EOB outlines what your insurance plan paid and your out-of-pocket responsibility. An EOB alone is not sufficient proof of actual payment; it indicates the amount you owe, not the amount you paid. Therefore, it should be kept with your payment receipt.

Retain all these records for an extended period. Although the IRS audit period is three years from the tax filing date, keep HSA documentation for at least seven years, or longer, potentially for the entire duration you maintain your HSA. This extended retention period is because there is no time limit for when you can reimburse yourself for a qualified medical expense incurred after your HSA was established. Comprehensive records ensure you can validate past expenses, protecting your tax-free withdrawals.

Accessing Your HSA Funds

Once you have incurred a qualified genetic testing expense and gathered documentation, methods are available for accessing your HSA funds. Many HSA providers issue a debit card linked directly to your account, usable for eligible medical expenses at the point of service. If the genetic testing provider accepts these cards, this offers a straightforward payment option.

Alternatively, you can pay for the genetic testing out-of-pocket using personal funds, such as a credit card, and then seek reimbursement from your HSA. This approach allows you to earn credit card rewards or keep HSA funds invested for long-term growth. When opting for reimbursement, you submit a claim to your HSA administrator.

The reimbursement process involves completing a claim form provided by your HSA administrator. This form requires details such as the date of service, provider name, expense amount, and a brief description of the medical service. You will then attach supporting documentation, including the itemized receipt, any applicable Letter of Medical Necessity, and the Explanation of Benefits from your insurance.

An advantage of HSAs is the flexibility regarding reimbursement timing. There is no deadline for when you must reimburse yourself for a qualified medical expense, provided the expense was incurred after your HSA was established. This means you could pay for genetic testing today and reimburse yourself next year, a decade from now, or even during retirement, allowing your HSA funds to grow tax-free over time.

Regardless of the payment method chosen, maintaining records is important. This includes keeping copies of all receipts, EOBs, LMNs, and your HSA statements. These records are for your financial management and are the primary defense against potential IRS inquiries. Should you withdraw funds for an expense that cannot be substantiated as qualified, those withdrawals may become taxable and subject to a 20% penalty if you are under age 65.