Can You Use Your HSA for Genetic Testing?

A Health Savings Account (HSA) provides a tax-advantaged savings and spending vehicle for individuals enrolled in high-deductible health plans. These accounts help people save for current and future healthcare costs. Funds contributed to an HSA are tax-deductible, grow tax-free, and can be withdrawn tax-free for qualified medical expenses. This triple tax advantage makes an HSA a valuable tool for managing healthcare finances.

Understanding Qualified Medical Expenses for HSAs

The Internal Revenue Service (IRS) defines what constitutes a “qualified medical expense” for HSA purposes. These are costs incurred primarily for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. This definition focuses on expenses directly related to medical care, rather than general health improvement or cosmetic procedures. For an expense to be qualified, it must be medically necessary and not reimbursed by other sources, such as health insurance.

Common examples of qualified medical expenses include doctor visits, prescription medications, hospital stays, and preventive care services. Amounts paid for equipment, supplies, and diagnostic devices also generally qualify if they are needed for these medical purposes. Expenses merely beneficial to general health, like vitamins or a vacation, typically do not qualify. The IRS publishes detailed guidance, such as Publication 502, which outlines eligible medical and dental expenses.

Eligibility of Genetic Testing for HSA Funds

Genetic testing can be an eligible expense for HSA funds, but its qualification depends on the purpose and medical necessity of the test. Diagnostic genetic testing, which is ordered by a healthcare provider to address a specific medical concern, is generally considered a qualified medical expense. This includes testing performed to diagnose an existing medical condition, assess risk for a diagnosed condition, or guide treatment for an illness. For instance, BRCA gene testing for individuals with a family history of breast or ovarian cancer, or pharmacogenomic testing to determine how a person’s genes affect their response to drugs for an existing illness, would typically qualify. Prenatal genetic testing to identify diagnosed fetal anomalies also falls under eligible expenses.

Conversely, genetic testing performed for non-diagnostic or elective reasons typically does not qualify as a medical expense. This category includes tests for general wellness insights without a specific medical indication, ancestry, or recreational purposes. For example, “spit-kit” tests for genealogical information are generally not eligible. The IRS distinguishes between the health-related components and non-health-related components of such tests, requiring an allocation of costs if a test provides both. The key determinant for eligibility is whether the test is primarily for the diagnosis, cure, mitigation, treatment, or prevention of a specific disease, as determined by a healthcare professional.

Using Your HSA for Genetic Testing Costs

When using your HSA for eligible genetic testing costs, maintaining thorough documentation is important. This documentation is crucial for substantiating the expense, especially during an IRS audit. You should retain detailed receipts from the genetic testing provider, which should specify the type of test performed and the date of service. If your health insurance is involved, an Explanation of Benefits (EOB) from your insurer provides valuable detail regarding the service and any amounts you paid.

For diagnostic testing, a doctor’s note or prescription indicating the medical necessity of the genetic test is an important piece of documentation. These records demonstrate that the expense meets the IRS criteria for a qualified medical expense. Keep these records for as long as your tax return is subject to audit (typically three years) or as long as your HSA is open, whichever period is longer. There are two primary methods for utilizing HSA funds for medical expenses. You can use an HSA debit card or checks provided by your HSA administrator to pay directly at the time of service. Alternatively, you can pay for the genetic testing out-of-pocket and then reimburse yourself from your HSA later. When reimbursing yourself, ensure you have all the necessary documentation to support the withdrawal.