Does an HSA Cover Exercise Equipment?

A Health Savings Account (HSA) is a tax-advantaged savings and spending account for qualified medical expenses. These accounts offer a triple tax benefit: contributions are tax-deductible, the funds grow tax-free, and withdrawals for eligible healthcare costs are also tax-free. HSAs are available to those enrolled in a high-deductible health plan (HDHP), serving as a financial tool for managing various healthcare expenditures.

General HSA Eligibility for Medical Expenses

The Internal Revenue Service (IRS) defines what constitutes a “qualified medical expense.” These are costs incurred primarily for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any structure or function of the body. Expenses must address a specific physical or mental condition rather than merely providing a benefit to general health. Common examples of qualified medical expenses include doctor visits, prescription medications, hospital services, and dental care. However, expenses for general well-being, such as vitamins or a vacation, are not considered eligible.

Specific Conditions for Exercise Equipment Coverage

Exercise equipment is typically not considered a qualified medical expense under IRS guidelines if its purpose is for general health improvement or prevention. However, such equipment may be eligible for HSA coverage under specific circumstances. The primary condition for eligibility is medical necessity: the equipment must be prescribed by a physician to treat a specific medical condition, illness, or injury.

For instance, if a doctor prescribes a treadmill or stationary bike as part of a treatment plan for conditions like obesity, diabetes, cardiovascular disease, or for physical therapy after an injury, it may qualify. To substantiate this medical necessity, a Letter of Medical Necessity (LMN) from a qualified medical professional is required.

Obtaining a Letter of Medical Necessity

A Letter of Medical Necessity (LMN) is a formal document from a licensed healthcare provider, such as a doctor, confirming that a specific item or service is medically necessary to treat a diagnosed condition. This letter is important for expenses like exercise equipment. The LMN must clearly state the patient’s specific diagnosis and explain how the prescribed exercise equipment will treat or alleviate that medical condition.

The letter should also include the recommended duration for which the equipment is needed and confirm that its purpose is not for cosmetic reasons. Keep a copy of this LMN with your personal records. While you typically do not submit it to your HSA administrator unless requested, it serves as essential documentation in case of an IRS audit.

Using HSA Funds for Approved Expenses

Once an expense, such as medically necessary exercise equipment, is qualified and any required Letter of Medical Necessity obtained, there are several ways to use HSA funds. You can directly pay for the approved expense using an HSA debit card at the point of purchase. Alternatively, you may choose to pay for the expense out-of-pocket and then reimburse yourself from your HSA. This reimbursement can be done by transferring funds from your HSA to your personal bank account.

Maintaining meticulous records is essential. Keep all receipts, invoices, and the Letter of Medical Necessity, if applicable. These documents substantiate the qualified nature of your expenses and are essential for tax purposes and proof of eligibility if your HSA expenditures are ever reviewed by the IRS. Using HSA funds for non-qualified expenses before age 65 can result in income taxes on the withdrawal, plus an additional 20% tax penalty.