Can You Use an HSA for Medically Necessary Lab Work?

Health Savings Accounts (HSAs) offer a tax-advantaged way for individuals with high-deductible health plans to save and pay for qualified medical expenses. Understanding how HSAs can be used for services like medically necessary lab work is important. This article clarifies the guidelines for using your HSA for lab services.

Understanding Qualified Medical Expenses

Qualified medical expenses, as defined by Internal Revenue Service (IRS) guidelines, are amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any structure or function of the body.

Medically necessary lab work generally falls within this definition, making it an eligible expense for HSA funds. For lab work to qualify, it must be prescribed or ordered by a physician or licensed healthcare professional and directly related to a medical condition, diagnosis, or treatment plan.

Expenses for general health or wellness not tied to a specific medical condition or diagnosis usually do not qualify. For example, purely cosmetic lab work or general screenings not recommended by a doctor are not eligible. The IRS emphasizes the expense must primarily alleviate or prevent a physical or mental disability or illness, not merely be beneficial to general health.

Common Lab Services Covered by HSA

Many lab services are qualified medical expenses when medically necessary and ordered by a healthcare professional. These include routine blood tests for conditions like high cholesterol, diabetes, or thyroid dysfunction, along with urine tests and diagnostic imaging interpretations.

Pathology reports, which analyze tissue samples for diagnostic purposes, are covered. Allergy testing to identify specific allergens causing a medical reaction is an eligible expense. Genetic testing may qualify if medically necessary for diagnosis or treatment of a disease.

Lab services not linked to a specific medical issue or preventative care, such as cosmetic surgery or general health screenings, do not qualify. An employment-related physical exam, even with lab work, also does not qualify.

Using Your HSA and Record Keeping

You have two primary methods for using your Health Savings Account for lab work. You can use an HSA-linked debit card directly at the time of service for immediate payment. Many HSA providers also offer online payment options or checks for direct payments.

Alternatively, pay for lab work out-of-pocket and reimburse yourself from your HSA later. Reimbursement can occur anytime, even years after the expense, provided the HSA was established before the expense date. This strategy allows HSA funds to potentially grow tax-free over a longer period.

Maintaining detailed records of all HSA expenses is essential for tax purposes and IRS audits. Retain receipts from the lab, Explanation of Benefits (EOB) statements, and doctor’s notes or prescriptions indicating medical necessity. These documents prove HSA distributions were used exclusively for qualified medical expenses.

The IRS requires records to show distributions were for qualified medical expenses, not reimbursed from another source, and not taken as an itemized deduction. These records, while not submitted with your tax return, must be readily available if requested. Keep them for at least three to seven years, aligning with general tax retention guidelines.