Is Sunscreen an HSA-Eligible Expense?

Health Savings Accounts (HSAs) offer a tax-advantaged way for individuals to save and pay for healthcare expenses. These accounts help individuals manage medical costs by providing a dedicated fund for various health-related needs. Understanding qualified expenses is important for maximizing their benefits.

Understanding HSA-Eligible Expenses

The Internal Revenue Service (IRS) defines “qualified medical expenses” for HSA purposes. According to IRS Publication 502, these are costs incurred primarily for the diagnosis, cure, mitigation, treatment, or prevention of disease, including treatments affecting any body structure or function. Only these expenses can be paid with HSA funds without incurring taxes or penalties.

Expenses for general health or cosmetic purposes typically do not qualify. For example, vitamins are generally not eligible unless prescribed to treat a specific medical condition. This distinction helps ensure HSA funds are used for genuine medical needs as defined by tax law.

Sunscreen as a Qualified Medical Expense

Sunscreen is a qualified medical expense only with specific medical justification. The IRS does not consider general-purpose sunscreen eligible for routine or cosmetic use. An exception applies when sunscreen is medically necessary to treat or prevent a specific diagnosed condition.

A Letter of Medical Necessity (LMN) from a licensed healthcare provider is required. This LMN must state the medical condition and explain how sunscreen is prescribed. Individuals with conditions like photosensitivity, a history of skin cancer, or other diagnosed dermatological issues may qualify.

The LMN provides evidence to justify the expense, aligning it with IRS medical care definitions. It should include patient details, physician information, diagnosis, and a clinical rationale for necessity. Without an LMN, using HSA funds for sunscreen risks disallowance by the IRS.

Using Your HSA Funds and Record Keeping

When using HSA funds for qualified medical expenses, several methods are available. Many HSA providers issue a dedicated debit card for direct use at pharmacies, doctor’s offices, or other medical merchants. Alternatively, you can pay out-of-pocket and then reimburse yourself from your HSA.

Reimbursement can be done via online transfer or by requesting a check from your HSA administrator. There is no time limit to reimburse yourself for qualified expenses, provided the expense was incurred after your HSA was established.

Record keeping is important for all HSA expenses. You are responsible for proving that all HSA distributions were used for qualified medical expenses in case of an IRS audit. Retain all receipts, Explanation of Benefits (EOBs), and any Letters of Medical Necessity. These records should be maintained for at least three years after filing your tax return. Failure to provide adequate documentation for non-qualified expenses can result in the distributed amount being subject to income tax and a 20% penalty if you are under age 65.