Is Mouthwash an HSA Eligible Expense?
Navigate the rules for HSA eligibility. Discover when everyday items like mouthwash can be covered by your Health Savings Account.
A Health Savings Account (HSA) serves as a tax-advantaged savings account specifically designed for healthcare expenses. This account offers a dual benefit, functioning as both a spending account for immediate medical needs and an investment vehicle for future healthcare costs. Contributions to an HSA can be tax-deductible, and funds within the account grow tax-free, providing a valuable resource for managing medical expenditures.
Criteria for Qualified Medical Expenses
To utilize HSA funds, expenses must meet the Internal Revenue Service (IRS) definition of a “qualified medical expense.” According to IRS Publication 502, these are costs incurred primarily for the diagnosis, cure, mitigation, treatment, or prevention of disease. The expenses must also relate to affecting any structure or function of the body. This broad definition covers a wide range of medical, dental, and vision services and products.
Expenses for general health improvement, cosmetic purposes, or items that are merely beneficial to overall well-being are generally not eligible. For instance, vitamins for general health or personal hygiene products typically do not qualify. An exception applies if such items are specifically prescribed by a medical professional to treat a diagnosed medical condition. The expense must address a specific health issue, not just maintain general health.
Mouthwash Eligibility
Over-the-counter (OTC) mouthwash, when purchased for routine oral hygiene or cosmetic purposes like freshening breath, is typically not considered an HSA-eligible expense. This is because it falls under the category of a personal hygiene product, which does not primarily serve to diagnose, cure, mitigate, treat, or prevent a specific disease. Such general use items are outside the scope of qualified medical expenses.
However, mouthwash can become HSA eligible under specific circumstances. If a medical professional, such as a dentist or doctor, prescribes mouthwash to treat a particular medical condition, it then qualifies. Examples include medicated rinses prescribed for severe gingivitis, periodontitis, oral infections, dry mouth, or for post-surgical care. The prescription establishes medical necessity, transforming it from a general hygiene product into a treatment for a diagnosed ailment. Maintaining documentation of the prescription is crucial to substantiate its eligibility in case of an IRS inquiry.
Managing HSA Funds and Records
Effective management of HSA funds involves meticulous record-keeping for all expenditures. Account holders are responsible for ensuring that all expenses paid with HSA funds are indeed qualified medical expenses. It is imperative to retain receipts, invoices, and any necessary prescriptions, especially for items like mouthwash that require a medical directive for eligibility.
These records are essential for tax purposes and in the event of an IRS audit, which can occur for several years after filing. Without proper documentation, distributions from an HSA for non-qualified expenses may be subject to income tax and a 20% penalty.