When Is Lotion an HSA-Eligible Expense?

Health Savings Accounts (HSAs) serve as tax-advantaged savings vehicles specifically designed to cover qualified medical expenses. Navigating the rules for eligible expenses can be complex. The eligibility of common items, such as lotion, often raises questions. Adhering to the specific guidelines set forth by the Internal Revenue Service (IRS) is important to ensure proper use of HSA funds and avoid potential tax implications.

Understanding HSA Eligibility

To be considered HSA-eligible, an expense must primarily serve a medical purpose, according to the IRS definition of “medical care.” This definition encompasses amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. Expenses that are merely beneficial to general health, cosmetic in nature, or intended solely for general well-being do not qualify. For instance, common expenses like doctor visits, prescription medications, and eyeglasses are eligible due to their medical function.

The IRS outlines these criteria in publications such as Publication 502. This guidance clarifies that the expense must directly address a physical or mental illness or defect, not just promote overall wellness. Items that improve general health without treating a specific condition are excluded.

Lotion Eligibility General Rules

Most over-the-counter (OTC) lotions, moisturizers, and general skincare products are not eligible for HSA reimbursement. Their primary use is for cosmetic reasons, hydration, or preventing dryness, which the IRS considers general health or personal care rather than medical treatment. These products are purchased regardless of a diagnosed medical need.

The distinction lies in the product’s intended purpose; if a lotion is used for routine skincare or aesthetic enhancement, it falls outside the scope of “medical care.” This rule applies even if the product claims general health benefits.

Prescription and Medical Necessity

Lotion can become HSA-eligible under specific circumstances, particularly when prescribed by a qualified healthcare provider. If a physician prescribes a lotion to treat a diagnosed medical condition, such as severe eczema, psoriasis, or dermatitis, it qualifies as an eligible expense. This prescription transforms the item from a general care product into a medical necessity for a specific treatment.

A formal prescription or a Letter of Medical Necessity (LMN) from the healthcare provider is important in these cases. The LMN should explicitly state that the lotion is required for medical treatment, detailing the diagnosis and how the lotion addresses the condition. The expense must be directly for the treatment of the condition, rather than simply for comfort or cosmetic improvement.

Documentation and Record Keeping

Maintaining thorough documentation is important for any HSA-eligible lotion expense. The taxpayer bears the burden of proof to substantiate the eligibility of expenses in the event of an IRS audit. Key documents to retain include the original itemized receipt for the purchase, which should detail the product, date, and cost.

Additionally, a copy of the doctor’s prescription or the Letter of Medical Necessity must be kept. These documents provide the evidence that the lotion was purchased for a legitimate medical purpose. While these records are not submitted with tax returns, they must be readily available if requested by the IRS, ideally for at least seven years.