When Is Laser Hair Removal HSA Eligible?
Navigate the IRS rules to determine if your laser hair removal is a qualified HSA expense. Understand medical necessity and documentation for eligibility.
Health Savings Accounts (HSAs) are tax-advantaged savings vehicles for qualified medical expenses. They offer a triple tax benefit: contributions are often tax-deductible, earnings grow tax-free, and withdrawals for eligible medical costs are tax-free. Only expenses deemed medically necessary by the Internal Revenue Service (IRS) are eligible for tax-free distributions.
Understanding Qualified Medical Expenses
The Internal Revenue Service (IRS) defines a “qualified medical expense” as costs for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for treatments affecting any structure or function of the body. Expenses for general health and wellness, such as vitamins not prescribed for a medical condition or elective cosmetic procedures, are not considered qualified medical expenses.
Cosmetic procedures do not meet the IRS criteria for a qualified medical expense. An exception exists if the procedure is necessary to correct a deformity directly resulting from a congenital abnormality, a personal injury, or a disfiguring disease.
Determining Laser Hair Removal Eligibility
Laser hair removal, while often considered a cosmetic procedure, can be a qualified medical expense if it addresses a specific medical condition. Eligibility requires medical necessity, meaning a licensed medical professional must prescribe the treatment to alleviate or treat an existing illness or physical disability.
For instance, conditions like hirsutism, which involves excessive hair growth, or folliculitis, an inflammation of hair follicles, may warrant laser hair removal as a medically necessary treatment. Other conditions that could qualify include pilonidal cysts and hidradenitis suppurativa, where hair follicles contribute to the disease progression. A doctor’s diagnosis of such a condition and a written prescription or a letter of medical necessity are needed to establish eligibility for HSA funds. Without this medical justification, laser hair removal is treated as a cosmetic procedure and is not eligible for HSA reimbursement.
Substantiating Your Claim
To ensure medically necessary laser hair removal expenses are reimbursed through an HSA, record-keeping is required. The primary document needed is a letter of medical necessity (LMN) from a licensed healthcare provider. This letter should state the diagnosed medical condition that necessitates the treatment, explaining how the procedure will alleviate or treat the condition.
In addition to the LMN, individuals must retain detailed receipts or invoices for the services. These documents should specify the service, date, and amount charged. Any relevant medical records supporting the diagnosis and necessity should also be kept. While HSA administrators may not always require submission, the accountholder is responsible for maintaining them for potential IRS audit purposes for seven years.
Comparing Health Savings Accounts with Other Plans
The eligibility rules for qualified medical expenses, including those for laser hair removal, are consistent across Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and Health Reimbursement Arrangements (HRAs). If laser hair removal is medically necessary and supported by documentation, it is eligible for reimbursement from an FSA or HRA, similar to an HSA.
While the definition of eligible expenses is similar, the operational aspects of these accounts differ. For example, FSAs often operate under a “use-it-or-lose-it” rule, where funds not used by the end of the plan year may be forfeited, though some plans offer a grace period or a limited carryover amount. HRAs are employer-funded and controlled, with employers setting specific rules for reimbursement within IRS guidelines. Despite these administrative differences, the IRS criteria for medical necessity apply uniformly when determining eligibility.