Can You Use Your HSA for Skin Care?

A Health Savings Account (HSA) is a tax-advantaged savings account specifically designed for individuals enrolled in a high-deductible health plan. This financial tool allows you to save and pay for qualified medical expenses with tax-free contributions, tax-free growth, and tax-free withdrawals. A common question arises regarding the use of HSA funds for skincare products and treatments. The answer to this query is not always straightforward, as eligibility depends on specific criteria established by the Internal Revenue Service (IRS).

General Rules for HSA Eligibility

The IRS defines “medical care” as expenses paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. Generally, expenses for general health improvement, cosmetic purposes, or those that are merely beneficial to overall well-being are not eligible.

A key principle for HSA eligibility is medical necessity, often requiring a prescription or a formal diagnosis from a healthcare provider for a specific medical condition. Expenses must primarily serve a medical purpose rather than a cosmetic one. If an item or service has both medical and cosmetic applications, its primary intent determines eligibility.

For instance, general health items like vitamins or gym memberships are typically not HSA eligible unless specifically prescribed by a medical professional to treat a diagnosed condition. The IRS provides detailed guidance on these rules in publications such as IRS Publication 502, “Medical and Dental Expenses.”

Determining Skincare Eligibility

Applying the general HSA rules to skincare reveals that most everyday products are not eligible. Items primarily for cosmetic enhancement, general well-being, or routine hygiene, such as daily cleansers, general moisturizers, anti-aging creams, toners, serums, face masks, and general makeup, are typically not covered. The IRS considers these personal care items rather than medical expenses, even if they claim health benefits.

However, certain skincare products and treatments can be HSA-eligible if they address a specific medical condition and are medically necessary. Examples include prescription medications for conditions like acne (such as isotretinoin or specific topical treatments containing active ingredients like benzoyl peroxide or salicylic acid), eczema, or psoriasis. These are eligible as they treat or mitigate a diagnosed medical condition, often requiring a doctor’s prescription.

Sunscreen can also be HSA-eligible under specific circumstances. If a healthcare provider prescribes it for a diagnosed medical condition, such as lupus, severe sun sensitivity, or a history of skin cancer, it may qualify. A prescription is now needed for sunscreen to be HSA-eligible, even for over-the-counter medicated products. Similarly, certain wound care products and medical chemical peels or laser treatments prescribed for diagnosed skin conditions may also be eligible.

Managing Your Skincare Expenses

When using your HSA for eligible skincare expenses, meticulous record-keeping is crucial. You should retain detailed receipts for all purchases, along with any supporting documentation such as doctor’s notes, prescriptions, or letters of medical necessity. These records are essential because the IRS may request proof of eligibility, and unsubstantiated withdrawals can incur income tax and a 20% penalty.

You can typically use your HSA in one of two ways: either directly with an HSA debit card at the point of sale for eligible items, or by paying out-of-pocket and then submitting a claim for reimbursement from your HSA administrator. If you pay out-of-pocket, ensure the expense was incurred after your HSA was established. It is advisable to keep these records for at least seven years, as tax returns may be subject to audit for that period.

Check with your specific HSA administrator regarding their submission requirements, as procedures can vary. While your HSA statements outline contributions and payments, they do not replace the need for individual receipts and medical documentation to substantiate each expense. Maintaining organized records protects you during an IRS inquiry.