Kathryn Miller at Financial Planning wrote about what clients miss about health savings accounts: the covered expenses go well beyond copays and dental, into physical therapy, chiropractic care, mental health treatment and, with a doctor's letter, things like air purifiers and fitness programs.
My contribution was the boundary. An HSA is not a wellness fund. Cosmetic procedures are almost always denied on audit, and the account holder faces a penalty on top of the full amount being treated as taxable income. The same procedure can go the other way: Botox to correct a deformity or treat a documented medical condition qualifies, while Botox for appearance does not. The line is medical necessity, not medical-adjacent.
The overlooked expenses I pointed to: therapy and counseling, acupuncture, a slice of long-term care insurance premiums on a sliding scale by age, and even home modifications like a ramp if medically necessary. The real boundary is the test itself. Not "Is this health related?" but "Is this primarily for the diagnosis, treatment, cure or prevention of a condition?"
For clients who let an HSA grow for retirement, that test matters twice: once when the expense happens, and again years later when they reimburse themselves tax-free and need the receipt to prove it.
Read the full article at Financial Planning →
