Can You Use Your HSA on Skincare Products?

A Health Savings Account (HSA) provides a tax-advantaged savings and spending mechanism for healthcare costs. An HSA offers a unique opportunity to manage present and future healthcare needs while potentially reducing taxable income. The funds within an HSA can grow tax-free, and withdrawals for eligible expenses are also tax-free, making it a valuable financial tool for healthcare planning.

Understanding Eligible Medical Expenses for HSAs

The Internal Revenue Service (IRS) establishes specific guidelines for what constitutes an “eligible medical expense” for HSA purposes. According to IRS Publication 502, these expenses must be for the “diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.” The expense must primarily aim to alleviate a physical or mental defect or illness.

Common examples of expenses that generally qualify include visits to medical doctors and specialists, prescription medications, and hospital services. Diagnostic tests, such as X-rays and laboratory fees, are also typically eligible. Costs for medical equipment like bandages and crutches, as well as certain dental and vision care, are usually covered expenses.

Qualifying Skincare Expenses

For skincare products to be eligible for HSA reimbursement, they must directly address a specific medical condition rather than serving general cosmetic purposes. This typically requires a diagnosis from a healthcare provider and often a prescription for the product.

Specific medical conditions like severe acne, eczema, psoriasis, dermatitis, and rosacea frequently necessitate medically-focused skincare. Prescription topical medications, such as tretinoin for acne or specialized creams for eczema and psoriasis, are generally eligible. Over-the-counter medicated creams can also qualify if a physician prescribes or specifically recommends them for a diagnosed condition. Sunscreens with an SPF of 15 or higher and broad-spectrum protection are also generally eligible as preventive medical devices, particularly if prescribed, to protect against skin damage and reduce skin cancer risk.

Non-Qualifying Skincare Expenses

Skincare products purchased solely for general health, cosmetic enhancement, or improving appearance are typically not eligible for HSA reimbursement. Examples of ineligible skincare expenses include anti-aging creams, general moisturizers, and toners that do not treat a specific medical condition. Makeup and other cosmetic products are also generally not covered, as their primary purpose is aesthetic. Procedures like facials or chemical peels are usually ineligible unless a dermatologist determines them to be medically necessary for a diagnosed condition, such as severe acne or rosacea. Similarly, cosmetic surgeries intended only to improve appearance are not HSA-eligible, unless necessary to correct a deformity from a congenital abnormality, personal injury, or disfiguring disease.

Documentation and Record-Keeping for Skincare Purchases

Maintaining thorough records is important for any HSA expenditure, especially for skincare items that might require substantiation of medical necessity. These records serve as proof for tax purposes or in the event of an IRS audit or a request from the HSA administrator. It is advisable to keep documentation for the life of the account and for at least three years after the final distribution from the HSA.

Specific types of documentation are necessary to demonstrate that a skincare purchase qualifies as a medical expense. An itemized receipt showing the product purchased, the date of purchase, and the cost is fundamental. Additionally, a doctor’s note or prescription explicitly stating the medical condition and the necessity of the skincare product is often required. For certain items, a Letter of Medical Necessity (LMN) from a healthcare provider may be needed, detailing the medical condition, the recommended treatment, and how the product alleviates the condition.