Can You Use HSA for Shampoo and Other Personal Care?
Navigate HSA eligibility with clarity. Understand IRS guidelines for common expenses and distinguish between general and medically necessary items.
A Health Savings Account (HSA) provides a tax-advantaged way for individuals to save and pay for qualified medical expenses. This account is typically paired with a high-deductible health plan (HDHP), allowing funds to grow tax-free and be withdrawn tax-free for eligible healthcare costs. An HSA helps manage healthcare expenditures efficiently, offering a financial tool for both current and future medical needs.
Understanding HSA Eligible Expenses
The Internal Revenue Service (IRS) defines “qualified medical expense” for HSA purposes. These expenses must primarily be for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any structure or function of the body. Costs for equipment, supplies, and diagnostic devices needed for these purposes are generally included. This definition ensures only items or services with a clear medical purpose are eligible, excluding those merely beneficial to general health or for cosmetic reasons.
IRS Publication 502, “Medical and Dental Expenses,” and Internal Revenue Code Section 213(d) provide guidance on eligible medical expenses. Funds withdrawn from an HSA for non-qualified expenses are subject to income tax and a 20% penalty if the account holder is under age 65. Consult these official IRS resources for a complete list.
Shampoo and Personal Care Items
Regular, everyday shampoo and most other personal care items intended for general hygiene are not considered HSA-eligible expenses. Products like soap, toothpaste, lotions, and standard conditioners are generally excluded. Their primary function is for personal care and convenience, not for treating or preventing a specific medical condition.
An exception exists for shampoo and similar personal care items when they possess a clear medical purpose. If a shampoo is medicated, prescribed by a doctor, or primarily used to treat a diagnosed medical condition, it can qualify. For instance, medicated shampoos for conditions like eczema, psoriasis, severe dandruff, or parasitic infestations such as lice, are often eligible. These products contain active ingredients that align with the IRS definition of a qualified medical expense.
For many over-the-counter medicated products, including some medicated shampoos, a prescription is no longer required for eligibility, a change implemented by the CARES Act effective January 1, 2020. However, a Letter of Medical Necessity (LMN) from a healthcare professional may still be necessary for certain items. An LMN confirms the product is essential for treating a specific medical condition. In some cases, only the cost exceeding that of a comparable non-medicated shampoo may be qualified.
Documentation and Record-Keeping
Maintaining thorough records is important for managing an HSA. Account holders are responsible for substantiating that all withdrawals were used for qualified medical expenses. This documentation is important for tax purposes and in the event of an IRS audit.
It is important to keep detailed receipts and invoices for all medical purchases made with HSA funds. For items requiring medical necessity, such as medicated shampoo, a doctor’s note or a Letter of Medical Necessity should be retained alongside the purchase receipt. While HSA administrators typically do not require submission of receipts for every withdrawal, the responsibility to prove eligibility rests solely with the individual. These records should be kept for at least three years from the tax filing date, and potentially longer, up to seven years, to align with IRS audit periods. Digital storage of these documents can help ensure their preservation and accessibility.