Can You Buy Formula With an HSA Card?

A Health Savings Account (HSA) offers a tax-advantaged way to save and pay for eligible healthcare expenses. It provides financial benefits like tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical costs. Many people wonder if common household purchases, such as baby formula, can be covered by an HSA. This article clarifies the conditions under which baby formula may be considered an eligible expense.

Understanding HSA-Eligible Expenses

The Internal Revenue Service (IRS) sets guidelines for what constitutes an HSA-eligible medical expense. Expenses qualify if they are primarily for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any structure or function of the body. Common eligible expenses include doctor visits, prescription medications, dental care, and vision services.

Products or services for general health, convenience, or cosmetic purposes do not qualify unless prescribed for a specific medical condition. For instance, general vitamins or gym memberships are excluded unless a healthcare provider deems them medically necessary to treat an illness.

Formula as a Medical Expense

Regular baby formula, used for a healthy infant’s general nutritional needs, is not considered an HSA-eligible expense. The IRS views baby formula as a food item that satisfies normal dietary requirements, rather than a medical treatment.

However, baby formula can become an eligible medical expense when it is medically necessary to treat a particular medical condition or disease. This often requires a Letter of Medical Necessity (LMN) or a prescription from a licensed healthcare provider, such as a doctor or nurse practitioner. The document must clearly state the specific medical condition, such as severe allergies, metabolic disorders, or certain digestive issues, that necessitates the specialized formula. It should also specify the particular formula required and the duration for which it is needed. The eligible amount may be limited to the cost difference between the specialized formula and a comparable regular formula.

Using Your HSA Card for Purchases

Once eligibility for specialized formula is established through a medical necessity document, there are practical steps for using your HSA funds. You may use your HSA debit card directly at pharmacies or other retailers that process HSA-eligible transactions. Many merchants have systems to identify qualified medical items at the point of sale.

Alternatively, you can pay for the specialized formula out-of-pocket and then seek reimbursement from your HSA administrator. This process involves submitting a claim form, along with the detailed receipt for the formula purchase and a copy of the Letter of Medical Necessity or prescription. There is no deadline for reimbursing yourself for past qualified medical expenses, as long as the expense was incurred after your HSA was established.

Thorough documentation is necessary, including original receipts for formula purchases, the prescription or Letter of Medical Necessity, and any correspondence with your HSA administrator. These records substantiate the expense in the event of an IRS audit. Inadequate documentation can lead to the expense being deemed non-qualified, potentially resulting in income tax and a 20% penalty if you are under age 65. Retain these records for at least seven years, aligning with potential IRS audit periods.