Can You Use Your HSA for a Gym Membership?
Unpack the specific criteria for using your Health Savings Account to cover gym memberships. Understand eligibility and avoid common pitfalls.
Health Savings Accounts (HSAs) offer a tax-advantaged way to save for and pay for healthcare expenses. Many individuals wonder if these funds can be used for non-traditional medical costs, such as gym memberships. This article clarifies when a gym membership might qualify as an HSA-eligible expense.
General Rules for HSA Eligibility
Health Savings Accounts are designed for individuals enrolled in high-deductible health plans. Funds contributed to an HSA can be used for “qualified medical expenses” as defined by the Internal Revenue Service (IRS). These expenses include costs for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any structure or function of the body.
Qualified medical expenses cover a wide range of services and products, such as doctor visits, prescription medications, dental care, and vision care. The primary purpose of the expense must be for medical care, not merely for general health improvement.
Gym Membership Eligibility
Gym memberships are not considered qualified medical expenses. They are viewed as personal or recreational expenses aimed at general health and wellness, rather than for a specific medical purpose.
A gym membership can become an eligible expense if a physician prescribes it for a specific medical condition. This requires a “Letter of Medical Necessity” (LOMN) from a licensed healthcare provider. The LOMN must specify the medical condition, explain how the gym membership is necessary to treat or mitigate that condition, and indicate the duration for which it is prescribed. Conditions that might warrant such a prescription include obesity, heart disease, diabetes, or other chronic conditions where physical activity is a direct component of the treatment plan. The LOMN remains valid for about 12 months.
Documentation and Substantiation
To ensure a gym membership expense qualifies under a Letter of Medical Necessity, careful record-keeping is important. Account holders should retain the original Letter of Medical Necessity as evidence of medical necessity. Receipts for gym membership payments, clearly showing dates and amounts, should also be kept.
These documents are important for substantiating the expense if the HSA administrator requests verification or in the event of an IRS audit. Account holders are responsible for proving the eligibility of any expense if questioned, even if receipts are not always required. Records should be maintained for at least three years, as this is the period for which tax returns remain open to audit.
Consequences of Ineligible Use
Using HSA funds for expenses that do not meet the qualified medical expense criteria can result in financial penalties. Any distribution from an HSA for a non-qualified expense is subject to income tax.
In addition to income tax, an extra 20% penalty tax is applied to the ineligible amount withdrawn. For instance, if $500 is used for a non-qualified expense, a $100 penalty would be assessed along with the income tax. This penalty is waived if the account holder is age 65 or older, disabled, or deceased.