Can You Use HSA for Cosmetic Procedures?
Clarify the nuanced guidelines for using your HSA to cover cosmetic procedures. Understand medical necessity and IRS eligibility.
A Health Savings Account (HSA) offers a tax-advantaged way to save and pay for healthcare expenses. Individuals with high-deductible health plans can contribute to an HSA, allowing funds to grow and be withdrawn tax-free for qualified medical expenses. This article examines when HSA funds can be used for cosmetic procedures, according to Internal Revenue Service (IRS) guidelines.
Understanding Qualified Medical Expenses
The IRS defines a “qualified medical expense” as an amount paid primarily for the diagnosis, cure, mitigation, treatment, or prevention of disease. This definition also extends to costs incurred for the purpose of affecting any structure or function of the body. Expenses that are merely beneficial to general health, such as vitamins or a vacation, are not considered qualified medical expenses.
Cosmetic Procedures and HSA Eligibility
Generally, expenses for cosmetic surgery or other similar procedures are not considered qualified medical expenses. The IRS specifically excludes procedures directed at improving appearance that do not meaningfully promote the proper function of the body or prevent or treat illness or disease. This means that purely elective cosmetic procedures, performed solely for aesthetic enhancement without a medical necessity, typically do not qualify for HSA reimbursement.
There are specific exceptions to this general rule. A cosmetic procedure may be considered a qualified medical expense if it is necessary to ameliorate a deformity arising from a congenital abnormality, a personal injury, or a disfiguring disease. An example might be reconstructive surgery following a traumatic accident or a procedure to correct a birth defect.
When Cosmetic Procedures May Qualify
Certain cosmetic-related procedures can qualify as medical expenses if they meet the IRS criteria for medical necessity. For instance, breast reconstruction surgery following a mastectomy for cancer is an eligible expense. Similarly, reconstructive surgery to correct a deformity resulting from a personal injury or a congenital abnormality would qualify.
Procedures like breast reduction may qualify if they address a medical issue such as chronic neck or back pain, rather than being solely for appearance. Laser eye surgery (LASIK) for vision correction is also generally considered a qualified medical expense. Even Botox injections can be eligible if used to treat medical conditions like chronic migraines or severe muscle spasms, provided there is documentation from a healthcare professional stating the medical purpose.
When Cosmetic Procedures Do Not Qualify
Many common cosmetic procedures are generally not considered qualified medical expenses because their primary purpose is aesthetic improvement without a medical necessity. Examples include facelifts performed for anti-aging purposes or liposuction solely for weight reduction without an underlying medical condition. Procedures such as teeth whitening, hair transplants for cosmetic reasons, or chemical peels for skin rejuvenation also typically fall into this ineligible category.
Other procedures like eyelid surgery, cheek or chin enhancements, and most breast augmentations are usually not HSA-eligible if done purely for appearance. The key differentiator remains whether the procedure addresses a disease, injury, or congenital abnormality, or if it is merely for elective aesthetic enhancement.
Maintaining Proper Records
Maintaining meticulous records is important for all HSA distributions, especially for procedures that might have a cosmetic component but are claimed as medically necessary. The IRS may request documentation to substantiate that an expense was indeed qualified. Account holders should retain receipts, invoices, and any medical records or doctor’s notes that clearly state the medical reason for the procedure.
These records demonstrate that distributions were used exclusively for qualified medical expenses. While you do not submit these records with your tax return, keeping them for at least three to seven years is a prudent practice in case of an IRS audit.