Does HSA Cover OTC Meds and Products?

Health Savings Accounts (HSAs) offer a tax-advantaged way to save for and pay for qualified medical expenses. HSAs help individuals with high-deductible health plans manage healthcare costs. A common question concerns the use of HSA funds for over-the-counter (OTC) medications and products, which are now widely covered. This expanded coverage simplifies how common health-related purchases can be made using HSA funds.

Eligible Over-the-Counter Medications

Before 2020, most over-the-counter medications required a doctor’s prescription to be eligible for HSA reimbursement. The CARES Act in 2020 removed this prescription requirement. This change made a broad range of OTC medications and products eligible for purchase with HSA funds.

Individuals can now use their HSA to pay for many common health items without a doctor’s note. Eligible categories include:
Pain relievers (e.g., acetaminophen, ibuprofen)
Cold and flu medications (e.g., cough syrup, decongestants, throat lozenges)
Allergy medications (e.g., antihistamines, nasal sprays)
Stomach remedies (e.g., antacids, anti-diarrhea medications)
First-aid supplies (e.g., bandages, adhesive strips, antiseptic wipes)
Menstrual care products (e.g., tampons, pads)

How to Use Your HSA for OTC Purchases

Using your Health Savings Account for over-the-counter purchases typically involves one of two methods, depending on the merchant and your HSA administrator. Many retailers, especially pharmacies and larger grocery stores, accept HSA debit cards directly. When using an HSA debit card, the system often automatically identifies eligible medical expenses at the point of sale. This direct payment method eliminates the need for out-of-pocket spending and subsequent reimbursement.

Alternatively, if a merchant does not accept HSA debit cards, or if you prefer another payment method, you can pay for eligible OTC items out-of-pocket and seek reimbursement from your HSA. This process involves submitting a claim to your HSA administrator with an itemized receipt. The administrator will review the claim and, upon approval, transfer funds directly to your bank account or send a check. Retain all receipts for these purchases, regardless of payment method, to ensure compliance with tax regulations.

Documentation and Record Keeping

Maintaining thorough documentation for all purchases made with Health Savings Account funds, especially for over-the-counter items, is important. These records are used for potential verification by your HSA administrator and for tax purposes. The Internal Revenue Service (IRS) may request proof that expenses paid with HSA funds were qualified medical expenses during an audit. Without proper documentation, you might be required to pay taxes on the distribution, and potentially a penalty, if the expense cannot be substantiated.

For each OTC purchase, obtain and retain an itemized receipt. This receipt should clearly display the product name, transaction date, and exact cost. Generic receipts showing only a total amount may not be sufficient for IRS verification. Organize these receipts systematically, by date or category, and store them securely, physically or digitally. While there is no specific IRS-mandated retention period for HSA receipts, it is advisable to keep them for at least three to seven years, aligning with common tax record-keeping guidelines, to support any claims or deductions.

Citations

HSA-eligible expenses. HSAstore.com. Retrieved August 6, 2025, from https://www.hsastore.com/hsa-eligible-expenses.
How long should I keep records? Internal Revenue Service. Retrieved August 6, 2025, from https://www.irs.gov/businesses/how-long-should-i-keep-records.