If you have a high-deductible health insurance plan, you may have opened a health savings account (HSA) individually or through your employer. With an HSA, you can enjoy tax benefits such as tax-deductible contributions, tax-free earnings on HSA investments and tax-free withdrawals on qualified medical expenses.
Medical expenses that qualify for tax-free withdrawals from your HSA are generally those that qualify for the medical and dental expense deduction in IRS Publication 502. For example, if you made contributions to your HSA in 2021 and took withdrawals to pay or be reimbursed for eligible hospital or doctor bills in 2021, those contributions and withdrawal amounts are tax-free.
But you can also pay for or be reimbursed for additional medical expenses for which you may not have considered using HSA funds. For 2021 taxes, the IRS has added some new qualified medical expenses, along with reminders of recent changes to HSA eligible medical expenses in previous tax years.
Here are five eligible health savings account medical expenses you may be able to deduct on your 2021 federal income taxes.
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1. Personal protective equipment (PPE)
If you used funds from your HSA to pay for personal protective equipment (PPE), those purchases are eligible medical expenses that may be paid or reimbursed from an HSA, according to the IRS. Eligible PPE expenses for you, your spouse or your dependents are:
- Masks
- Hand sanitizer
- Sanitizing wipes
Find out: How to File Taxes to Maximize Your Refund and Avoid Audits
2. COVID-19 home testing costs
Did you, your spouse or a dependent purchase COVID-19 home tests in 2021? If so, the cost of those tests is considered an eligible medical expense by the IRS. That means you can pay for them or be reimbursed from your HSA. And those withdrawals are tax-free on your 2021 federal income taxes as long as you paid for them before you established your health savings account.
3. Over-the-counter medicines
Under the CARES Act written into law in 2020, many over-the-counter products and medications without a prescription are reimbursable as “qualified medical expenses” that you can pay for or be reimbursed for from an HSA. The list of HSA-eligible over-the-counter products includes many everyday products you might buy regularly at the drugstore, including:
- Allergy and sinus medications
- Cough, cold and flu medication
- Eye drops
- Nasal sprays
- Pain relievers
- Sleep aids
- Laxatives and other digestive aides
- Anti-inflammatory medications
4. Menstrual care products
Under the CARES Act of 2020, you can pay for or be reimbursed for menstrual care products such as tampons, pads, cups, liners or similar menstrual items using tax-free HSA withdrawals.
5. Telehealth and remote care
The CARES Act also allows telehealth and remote medical care expenses to be covered at no cost by HSA plans through December 31, 2021, even if you’ve not met your health plan’s deductible.
Where can I learn more about eligible HSA expenses?
This list covers eligible medical expenses that many people don’t know they can pay or be reimbursed for by an HSA. Want to find out more about tax benefits and qualified medical expenses for your HSA?
Visit IRS Pub. 8889 for complete Health Savings Account for instructions on how to report HSA contributions, figure your HSA deduction and amounts you must include as income and any additional tax you may owe.
