Is Physical Therapy Covered by an HSA?

A Health Savings Account (HSA) is a tax-advantaged savings vehicle for healthcare expenses. It allows individuals to set aside pre-tax money for medical costs. Many people wonder if common treatments, such as physical therapy, are eligible for coverage through these accounts. Understanding the specific guidelines for qualified medical expenses is essential to effectively utilize an HSA.

Defining Qualified Medical Expenses for HSAs

The Internal Revenue Service (IRS) establishes what constitutes a “qualified medical expense” for HSA purposes. These are defined as amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any structure or function of the body. The expense must primarily be for medical care, not merely beneficial to general health. For example, a general exercise program or vitamins for overall wellness do not qualify unless prescribed for a specific medical condition.

Commonly covered expenses include payments for medical services provided by physicians, surgeons, and other practitioners. This broad definition encompasses a wide range of services and products, such as doctor visits, prescription medications, hospital services, and diagnostic devices. The IRS details eligible expenses in Publication 502, which provides comprehensive guidance. Account holders are responsible for determining if an expense meets these criteria before using HSA funds.

Physical Therapy as a Qualified Medical Expense

Physical therapy is generally considered a qualified medical expense when it meets IRS criteria for medical care. This treatment helps restore function, improve mobility, and alleviate pain, directly affecting the body’s structure and function. To qualify, physical therapy must be prescribed or recommended by a licensed healthcare provider, such as a doctor or chiropractor, for a specific medical condition, injury, or disease. This includes initial evaluations, ongoing therapy sessions, and medically necessary equipment or supplies used in the treatment plan.

The key distinction lies in the medical necessity of the treatment. Physical therapy expenses are eligible when directly related to the diagnosis, cure, mitigation, treatment, or prevention of a diagnosed condition. Activities for general fitness or wellness, like a gym membership without a doctor’s prescription, do not qualify. A “Letter of Medical Necessity” from a healthcare professional may be required to substantiate that the physical therapy is for a specific medical condition.

Using Your HSA Funds for Physical Therapy

Once physical therapy is a qualified medical expense, you have several methods for using HSA funds. Many HSA providers offer a debit card for direct payment at the time of service. This provides immediate access to your funds for eligible expenses. Always ensure the provider accepts HSA debit cards before your appointment.

Alternatively, you can pay for physical therapy services out-of-pocket and then reimburse yourself from your HSA. This involves submitting a claim to your HSA administrator, often with supporting documentation. Maintaining thorough records is crucial for tax purposes and in case of an IRS audit. Documentation should include detailed receipts, explanation of benefits (EOB) statements from your insurance, and doctor’s notes or prescriptions confirming medical necessity. Retain these records for at least three years after filing your tax return, or as long as your account remains open, to avoid potential penalties for non-qualified withdrawals.