Does HSA Cover Melatonin? What You Need to Know

Health Savings Accounts (HSAs) offer a tax-advantaged way to save and pay for qualified medical expenses. These accounts provide a triple tax benefit: contributions are tax-deductible, earnings grow tax-free, and withdrawals for eligible expenses are also tax-free. Many individuals with high-deductible health plans utilize HSAs to manage their healthcare costs. Account holders often inquire about the eligibility of various health-related purchases, including over-the-counter items and supplements, under IRS guidelines.

Understanding HSA-Eligible Expenses

The Internal Revenue Service (IRS) defines qualified medical expenses as costs paid 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, outlined in IRS Publication 502, serves as the foundation for determining what an HSA can cover. Expenses that are merely beneficial to general health, such as vitamins taken for overall wellness, typically do not meet this criterion.

Over-the-counter (OTC) medications and drugs are generally eligible for HSA reimbursement without a prescription. This means many common OTC medicines can be purchased directly with HSA funds. However, for certain items not clearly medicines or used for general health, specific conditions may apply.

For items in a gray area or considered general health products, eligibility often hinges on medical necessity. If a healthcare provider recommends a particular item to treat or prevent a specific medical condition, it may become an eligible expense. This distinction is important because it differentiates between general wellness and addressing a diagnosed health issue.

Melatonin’s HSA Eligibility

Melatonin is generally classified as a dietary supplement and is typically not eligible for HSA reimbursement when purchased for general wellness or routine sleep support. IRS guidelines state dietary supplements are not qualified medical expenses if their purpose is merely to promote general health.

Melatonin can become HSA-eligible if a qualified medical professional prescribes or recommends it for the treatment of a specific medical condition. For instance, if a doctor diagnoses a sleep disorder and determines melatonin is a necessary part of the treatment plan, its cost may then be covered. In such cases, the expense shifts from general wellness to medical care aimed at alleviating a specific illness.

To establish medical necessity for melatonin, a Letter of Medical Necessity (LOMN) is typically required from the prescribing healthcare provider. This document explains why melatonin is essential for the patient’s health, linking its use directly to a diagnosed condition. The LOMN should include the specific medical condition, the recommendation for melatonin, and possibly the duration or dosage.

Required Documentation for HSA Purchases

Maintaining thorough documentation for all HSA-funded purchases is important, particularly for items like melatonin that require specific medical justification. The IRS may audit HSA accounts, and account holders are responsible for proving that all distributions were for qualified medical expenses. Keeping accurate records helps avoid potential taxes and penalties on non-qualified withdrawals.

Key documents to retain include itemized receipts for every purchase, showing the date, product name, and amount paid. For expenses requiring medical necessity, the Letter of Medical Necessity (LOMN) from a licensed healthcare provider is crucial. This letter should clearly state the diagnosed condition, the recommended treatment, and how the item alleviates the condition.

It is advisable to keep these records, including receipts and LOMNs, for a minimum of seven years. This timeframe aligns with the period during which the IRS can typically audit tax returns. Organizing these documents, whether through physical files or digital scans, can simplify the process of demonstrating eligibility if an audit occurs.