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1 1 (November 15, 2024)

handle is hein.crs/goverhk0001 and id is 1 raw text is: Congressionol Research Service Informing the IegisI9tive debate since 1914 November 15, 2024 Health Savings Account (HSA) Qualified Medical Expenses Section 223 of the Internal Revenue Code (IRC) allows individuals to establish and contribute to a health savings account (HSA) while they are covered under certain high- deductible health plans (HDHPs). Individuals can withdraw money from their HSA to pay for eligible medical expenses, also known as qualified medical expenses, for the account holder, their spouse, or their dependents. These expenses are excluded from gross income for federal income taxes even if the individual no longer has an HSA- qualified HDHP at the time of the withdrawal. Qua ed Medica xpenses for For HSA purposes, qualified medical expenses include most items and services that would be considered medical care for the medical and dental expenses itemized deduction, as described in IRC Section 213(d). Qualified medical expenses also include menstrual care products and over-the-counter medications and drugs without a prescription. Premiums generally are not considered a qualifying medical expense, except in limited instances. Medical Care Under Internal Revenue Code 213(d) If an expense falls within the definition of medical care under IRC 213(d), it generally would be considered an HSA-eligible medical expense (notwithstanding any HSA- specific rules). IRC Section 213(d) does not provide an exhaustive list of all items and services that are considered medical care; rather, it provides a broad definition to include 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. Treasury regulations and case law further specify that these expenses must be incurred primarily for the prevention or alleviation of a physical or mental defect or illness. An expense is considered to prevent disease if there is a present existence or an imminent probability of developing a disease, physical defect, mental defect, or illness. The term medical care at IRC Section 213(d) also includes certain transportation and lodging expenditures, qualified long-term-care costs, amounts paid for health insurance, and limited amounts of long-term-care insurance premiums. Although health insurance premiums are included in the definition of medical care at 213(d), HSA-specific rules prevent using HSAs to pay for health insurance premiums except in limited instances. Regulations provide that costs for hospital services, nursing services, and body scans would fall within the definition of medical care and would be an HSA-eligible expense. Personal expenses that are merely beneficial to the general health of the individual, such as toothpaste, would not be considered medical care and would not be an HSA-eligible expense. Additionally, costs for illegal operations or treatments are not considered eligible medical care. In certain instances, an item or service that is typically considered a personal expense may be considered medical care under IRC Section 213(d). These instances will depend on the facts and circumstances of the situation in which the item or service is used. For example, the Internal Revenue Service (IRS) has held that the costs of a weight-loss program for the purpose of improvements of appearance, general health, or a sense of well-being would not be considered medical care; however, if the costs of a weight- loss program were for the purpose of treatment of a specific disease diagnosed by a physician (e.g., obesity, hypertension, heart disease), these expenses would constitute medical care. The IRS suggests using objective factors to determine if a typically personal expense can be considered medical care. These factors include the individual's purpose for the expense, whether a physician diagnosed a medical condition and recommended it, the treatment's relation and effectiveness to the illness, and the timing relative to disease onset or recurrence. In addition, personal expenses typically are considered a medical expense only if the individual would not have incurred the expense but for their disease or illness. Interna Revenue Service Resources The IRS provides guidance on which (and when) specific items and services can be considered medical care for purposes of IRC Section 213(d). Publication 502, which relates to the medical and dental expenses itemized deduction, offers detailed information about what items and services generally are and are not considered medical care under IRC Section 213(d). As such, the publication also indicates which items and services generally might or might not be considered a qualifying medical expense for HSA purposes, though it does not incorporate any HSA-specific rules. For example, Publication 502 does not take into account the HSA- specific rule generally excluding health insurance premiums from being considered a qualifying medical expense. In another example, even though Publication 502 indicates that over-the-counter medicines are not considered medical care for the medical and dental expenses itemized deduction, such medicines are considered qualifying medical expenses for HSA purposes. In addition, the IRS has published frequently asked questions (FAQ) that address whether certain costs related S

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