Can I Use My HSA for Liposuction?

Health Savings Accounts (HSAs) offer a tax-advantaged way to save and pay for healthcare expenses. These accounts cover a range of eligible medical costs for individuals enrolled in a high-deductible health plan. A common question arises regarding the use of HSA funds for cosmetic procedures, such as liposuction. Understanding qualified medical expense guidelines is necessary to determine eligibility.

Understanding Qualified Medical Expenses for HSAs

The Internal Revenue Service (IRS) defines what qualifies as a medical expense for HSA purposes. An expense must be primarily for the “prevention or alleviation of a physical or mental defect or illness” to be considered qualified. This includes costs for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any structure or function of the body. Common examples of qualified medical expenses include doctor visits, prescription medications, dental care, vision care, and diagnostic tests.

Expenses incurred for general health or cosmetic purposes are not qualified unless they meet specific medical necessity criteria. For an expense to be eligible, it must be for the account holder, their spouse, or qualified dependents. The IRS outlines these provisions in documents such as Publication 502, a guide for medical and dental expenses.

Liposuction and HSA Eligibility Criteria

Liposuction, when performed solely to enhance appearance, is not considered a qualified medical expense for HSA reimbursement. The IRS states that procedures directed at improving a patient’s appearance without meaningfully promoting proper body function or preventing/treating illness are not eligible. This includes procedures like facelifts, hair transplants, and liposuction when purely cosmetic.

However, liposuction can be considered an eligible expense if it is part of a treatment for a specific medical condition or disease. This exception applies when the procedure is necessary to improve a deformity resulting from a congenital abnormality, a personal injury, or a disfiguring disease. Examples of medically necessary liposuction may include removing fatty tumors (lipomas) or treating certain cases of lymphedema where excess fat interferes with physical function or causes pain. A medical diagnosis from a licensed physician, along with a recommendation stating its medical necessity, is required to meet these criteria.

Required Documentation for HSA Use

Maintaining thorough records is important for all HSA expenditures, particularly for uncommon expenses like liposuction. Should the IRS question the eligibility of an expense, you must be able to substantiate it. These records should be retained for as long as your tax return is subject to audit, which is three years.

For liposuction to be considered medically necessary, documentation is required. This includes a statement or Letter of Medical Necessity (LMN) from a physician. This letter must outline the medical condition being treated and explain why liposuction is medically necessary, not cosmetic. Individuals should also keep invoices and receipts from the medical provider, showing the date of service, service description (including liposuction), and the amount paid. Proof of payment from the HSA, such as bank statements or transaction records, must also be maintained, as these documents collectively demonstrate the expense was qualified, not reimbursed, and not claimed as an itemized deduction.