As I gather together all of my records for 2014 preparing for tax time, one document that continues to peek my interest is my list of health savings account (HSA)-qualified expenses. Why is this document so valuable? Because it shows a precise record of where my HSA dollars were spent and verifies that the expenses are indeed considered “qualified.” But what exactly is an HSA-qualified expense?
Qualified Medical Expenses
The IRS outlines which medical expenses it considers to be “qualified” in IRS publication 502: Medical and Dental Expenses 2014. This list is quite extensive and includes expenses such as health plan deductibles, coinsurance, copays and prescription costs. But did you know you there are a host of other expenses that qualify?
Policy Restrictions. If you have a grandfathered health plan, or plan that was in effect prior to March 23, 2010, an HSA can be quite valuable as you may have policy restrictions that leave some medical expenses uncovered such as maternity and mental health. HSA dollars can be used for both of these.
Long-Term Care. Medicare does not cover long-term care, therefore I typically recommend a long-term care insurance plan. HSA dollars can be used to pay for a portion of these premiums based on your age as seen here.
Special Equipment. HSA funds can be used for capital expenses for some home modifications for disabled or handicapped individuals including ramps, widening doors and modifying kitchen structures for easier accessibility.
Medicare premiums. HSA dollars can be used to reimburse you for any premiums you pay for Medicare Part A, Part B and Part D prescription coverage.
Don’t Miss These Important Qualified Expenses
There may be other medical services you pay for throughout the year that can be used as qualified expenses including:
- Chiropractic care
- Alternative medicine
- Dental care
- Transportation and lodging for medical care
- Nutritional supplements (if ordered by a physician to treat a specific diagnosis-you should keep a written prescription for your files)
- Contact lenses
The list of qualified expenses is quite extensive, so be sure to review this carefully so you can maximize your HSA dollars. Your tax accountant is an excellent resource if you have any questions about qualified expenses.
Who Can I Spend My HSA Dollars On?
Although not all family members may be covered under your high-deductible health plan, HSA funds can be used on qualifying dependents including:
- Children and stepchildren (and descendants – yes grandchildren!)
- Parents and grandparents
- Brothers and sisters (including step)
Again, these individuals must be considered dependants according to IRS code.
Remember – you have until April 15, 2015 to make contributions to your health savings account and claim a deduction on your 2014 tax return.
Do you have any questions about HSA qualified expenses? Have you maximized your contributions for 2014?