Is Castor Oil an HSA-Eligible Medical Expense?

A Health Savings Account (HSA) offers a valuable way to save and pay for qualified medical expenses. Available to individuals with a high-deductible health plan (HDHP), contributions grow tax-free, and withdrawals for eligible expenses are also tax-free. Understanding qualified medical expenses is important for effective HSA utilization.

HSA Eligibility for Over-the-Counter Medications

For an expense to be HSA-eligible, it must be for medical care. The IRS defines medical care as amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for treatments affecting any part or function of the body. Expenses merely beneficial to general health, such as vitamins or cosmetics, are not eligible unless specifically prescribed for a medical condition.

Prior to 2020, most over-the-counter (OTC) medications required a doctor’s prescription for HSA eligibility. However, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in March 2020, removed this requirement. This expanded the range of OTC drugs and medicines that can be purchased with HSA funds without a prescription. This includes common items such as pain relievers, cold and flu medicines, allergy medications, digestive aids, and various skin treatments.

Qualifying Uses of Castor Oil for HSA Reimbursement

Castor oil is generally not HSA-eligible if used for cosmetic purposes or general wellness, such as hair growth or skin moisturizing. Eligibility hinges on its use for a specific medical condition. If castor oil is used to treat, mitigate, or prevent an illness or medical condition, it may qualify as an eligible expense.

If a healthcare provider prescribes castor oil for a specific medical purpose, such as a laxative for chronic constipation or a particular skin ailment, it can be HSA-eligible. In such cases, a Letter of Medical Necessity (LMN) from a licensed healthcare provider is typically required. The LMN documents that the purchase is for a legitimate medical expense and not for general health or cosmetic benefit.

Documentation for HSA-Eligible Purchases

Maintaining meticulous records for all HSA expenses is necessary. This documentation is important for substantiating claims during an IRS audit. For every purchase, retain itemized receipts showing the date, item or service, and cost.

When a Letter of Medical Necessity (LMN) is required, it must include specific details from a licensed healthcare provider. This includes the patient’s diagnosed medical condition, the specific treatment or product recommended, how it will alleviate or treat the condition, and the duration of the treatment. These records, including receipts and any LMNs, should be kept for as long as your tax return remains open to audit (typically three years) or as long as your HSA is open, whichever is longer.