Is Allergy Medicine an HSA-Eligible Expense?

A Health Savings Account (HSA) offers a tax-advantaged way to save and pay for qualified medical expenses. These accounts are available to individuals enrolled in a high-deductible health plan (HDHP). Contributions to an HSA are tax-deductible, funds grow tax-free, and withdrawals for eligible medical expenses are also tax-free. HSAs provide a flexible mechanism for managing healthcare costs, allowing funds to roll over year to year, unlike some other health-related accounts.

Understanding HSA Eligibility

The Internal Revenue Service (IRS) defines what qualifies as an HSA-eligible medical expense. Expenses must be primarily for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any structure or function of the body. This broad definition covers a wide array of medical services, prescription drugs, and certain medical equipment. For example, costs for doctor visits, hospital stays, dental care, and vision care are eligible.

Expenses that are merely beneficial for general health, such as vitamins or cosmetic procedures not for medical necessity, are not eligible. IRS Publication 502 provides comprehensive guidance on what constitutes a qualified medical expense. This publication is the reference for determining eligibility.

Allergy Medication and Eligibility

Allergy medications are HSA-eligible expenses, provided they address a medical condition. This includes both prescription and over-the-counter (OTC) allergy medicines. Prior to 2020, OTC medications required a prescription from a healthcare professional to be HSA-eligible.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in March 2020, changed these rules. Effective January 1, 2020, the CARES Act removed the prescription requirement for OTC medicines, making them directly eligible for HSA reimbursement.

Common allergy medicines qualifying without a prescription include:
Antihistamines (like loratadine, cetirizine, fexofenadine, and diphenhydramine)
Nasal sprays (such as fluticasone and triamcinolone)
Decongestants (like pseudoephedrine)
Eye drops
These medications are eligible whether used for seasonal allergies, indoor allergies, or other allergen-related symptoms.

Using Your HSA for Medical Expenses

Utilizing HSA funds for medical expenses, including allergy medicine, involves straightforward methods. Account holders can use an HSA-linked debit card for direct payment at the time of purchase, similar to a regular bank card. Many HSA providers also offer online payment portals or checks for paying medical bills.

Alternatively, you can pay for eligible expenses out-of-pocket and then reimburse yourself from your HSA. This reimbursement can occur at any time, even years after the expense was incurred, as long as the expense was incurred after your HSA was established. To reimburse yourself, you can transfer funds from your HSA to your personal bank account.

Maintaining thorough records is essential for all HSA purchases, especially for tax purposes. You are responsible for proving the eligibility of any expense in case of an IRS audit. Receipts should include the date of service or purchase, a description of the item or service, and the amount paid. While some HSA administrators may not require immediate submission of receipts, retaining them is important to avoid potential penalties on distributions that cannot be proven as qualified medical expenses.