Is Isopropyl Alcohol 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 paired with high-deductible health plans (HDHPs) and allow individuals to contribute pre-tax money, which can grow tax-free and withdrawn tax-free for eligible healthcare costs. Understanding which expenses qualify is important for maximizing HSA benefits. This includes a wide range of services and products, from routine doctor visits to specific medical supplies.

HSA Eligibility Criteria

The Internal Revenue Service (IRS) defines what constitutes a “qualified medical expense” for HSA purposes. According to IRS Publication 502, medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. This broad definition covers many common healthcare costs such as fees for physicians, dentists, and other medical practitioners, prescription medications, and dental or vision care. For an expense to be qualified, its primary purpose must be for medical care to alleviate or prevent a physical or mental illness.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 expanded eligible expenses to include over-the-counter (OTC) medications and drugs without requiring a prescription. Many common items found in drugstores are now directly reimbursable with HSA funds. Previously, most OTC items needed a doctor’s prescription to be considered a qualified medical expense.

Isopropyl Alcohol HSA Eligibility

Isopropyl alcohol, commonly known as rubbing alcohol, is considered an eligible expense for Health Savings Accounts. As an over-the-counter antiseptic, it falls under the category of OTC medications and drugs that became HSA-eligible without a prescription. Its use is for preventing infection, cleaning minor cuts and abrasions, or sterilizing medical equipment, aligning with the definition of medical care.

While isopropyl alcohol is widely available and used for general first aid, its qualification as an HSA expense stems from its antiseptic properties. It is important to ensure that the primary use of any item purchased with HSA funds aligns with genuine medical necessity, even for OTC products.

Documentation and Record Keeping

Maintaining thorough records for all Health Savings Account expenses is a responsibility for HSA holders. The IRS requires individuals to keep documentation to demonstrate that distributions from an HSA were used exclusively for qualified medical expenses. This documentation is important in case of an IRS audit.

Records should include detailed receipts, invoices, or statements that show the date of service or purchase, the description of the item or service, and the amount paid. For expenses that might require additional substantiation, such as a Letter of Medical Necessity (LMN), retain this documentation. These records should be kept for at least three to seven years, aligning with the period a tax return remains open for audit.