Can You Use an HSA for Physical Therapy?

Health Savings Accounts (HSAs) are tax-advantaged savings accounts for managing healthcare costs. Individuals set aside pre-tax money for eligible medical expenses. Funds contributed to an HSA grow tax-free, and qualified withdrawals are also tax-free, benefiting those with a high-deductible health plan (HDHP).

Qualified Physical Therapy Expenses

Physical therapy expenses are qualified medical expenses when they address a specific medical condition. According to IRS guidelines, a qualified medical expense must be primarily for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any body structure or function. This means physical therapy must be medically necessary.

To qualify, physical therapy requires a prescription or referral from a physician or other licensed medical practitioner. This documentation helps establish the therapy’s legitimate medical purpose, not general health improvement or exercise. Common scenarios that qualify include therapy for injuries, chronic pain management, and rehabilitation following surgery or a serious illness.

Physical therapy solely for general health benefits, such as improving overall fitness or for cosmetic purposes, is not a qualified medical expense. For instance, a gym membership or general wellness massage without a medical diagnosis and prescription is not eligible for HSA funds. The service must directly treat a diagnosed medical condition or bodily dysfunction.

Maintaining Records for Reimbursement

Maintaining accurate records for physical therapy expenses paid with HSA funds is important for compliance. These records substantiate that distributions from your HSA were used for qualified medical expenses, especially during an IRS audit. Without proper documentation, any unproven distribution may be subject to income tax and a 20% penalty if the account holder is under age 65.

Retain itemized receipts from the physical therapy provider. Receipts should clearly show the date of service, treatment description, and amount paid. Also keep any Explanation of Benefits (EOB) statements from your health insurance provider, if applicable, as they detail services and processing.

A doctor’s prescription or referral for physical therapy is also important documentation, particularly for services considered general wellness. Keep these records organized, physically or digitally, for at least seven years. Many HSA administrators offer online portals to securely upload and store these documents.

Accessing HSA Funds for Payment

You can access HSA funds for qualified physical therapy expenses. One common method uses an HSA-linked debit card from your account administrator. This card functions like a standard debit card, allowing direct payment at the physical therapy clinic.

Alternatively, pay for physical therapy out-of-pocket and seek reimbursement from your HSA. Submit a claim to your HSA administrator, often online or by mail, with documentation like receipts and EOBs. The administrator processes the request and transfers funds to your linked bank account.

The reimbursement method offers flexibility; you can reimburse yourself for qualified expenses incurred years ago, provided the expense occurred after your HSA was established. Some HSA providers also offer direct bill payment options, allowing you to authorize payments directly from your HSA to your physical therapy provider.