Can You Use HSA for Bandages and First-Aid Supplies?
Navigate HSA eligibility for common health items and medical supplies. Learn what expenses qualify and how to properly document your purchases.
A Health Savings Account (HSA) functions as a tax-advantaged savings and spending vehicle designed to help individuals cover qualified healthcare costs. Funds contributed to an HSA grow tax-free and can be withdrawn tax-free for eligible medical expenses. This type of account serves as a flexible financial tool, allowing individuals to manage and pay for a range of healthcare needs. The fundamental principle governing HSA usage is that all distributions must be for expenses that qualify as “eligible medical expenses” under Internal Revenue Service (IRS) guidelines.
Understanding Eligible Medical Expenses
IRS guidelines define eligible medical expenses as costs incurred 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 payments for doctor visits, hospital stays, prescription medications, and dental or vision care.
Expenses not covered by an HSA include cosmetic procedures, general health items not directly tied to a medical condition, or health club dues. The distinction lies in whether the expense addresses a specific medical need or is for general well-being. The IRS provides detailed publications, such as Publication 502, that outline what constitutes a qualifying medical expense.
Bandages and Over-the-Counter Items
Bandages are an eligible expense for Health Savings Accounts. They fall under the category of supplies used for the treatment or prevention of injury. Many other common over-the-counter (OTC) medications and products also became eligible for HSA reimbursement without a prescription due to legislative changes with the passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in 2020.
Before this change, most OTC items required a doctor’s prescription to be considered eligible medical expenses. Now, products like pain relievers, cold and flu medicines, antacids, and allergy medications can be purchased directly with HSA funds. Menstrual care products and various first-aid supplies are also included in this expanded eligibility.
Maintaining Records and Substantiation
Maintaining accurate records for all HSA expenditures is a responsibility for the account holder. This documentation proves that funds were used for eligible medical expenses in compliance with IRS rules. Essential records include receipts detailing the purchase, along with any Explanation of Benefits (EOBs) from insurance providers. For services, a doctor’s note or a detailed invoice from the provider may be necessary.
These records are necessary because the account holder is responsible for substantiating that expenses are eligible in the event of an IRS audit. Failure to provide proper documentation for a withdrawal can result in the distributed amount being taxed as ordinary income. A 20% penalty may also apply if the account holder is under the age of 65. Diligent record-keeping protects the tax-advantaged status of the HSA.