Weight Loss Programs – How to use HSAs and Tax Deductions to Save Money

by | Oct 15, 2013 | Medical Weight Loss Programs | 0 comments

medical weight loss programs

Medical weight loss programs and getting healthy can sometimes be expensive, so it is important to make use of all the financial tools at your disposal. 

medical weight loss programs

Consider:

According to research from Custom Market Insights, weight loss is a $160 billion industry in 2023 and growing by 9.7% per year. By 2030, the weight loss industry is on target to be worth $305 billion. 

Let’s break it down into some numbers ordinary consumers can grasp:

On average, the typical consumer pays $55 per month for a gym or fitness club membership. That’s $600.41 per year. Costs vary from gym to gym, but they run from a low $200 per year for the no-frills cardinal fitness club  up to $1,958 per year for the high-end lifetime fitness club. 

Meanwhile, the average price of a 2000-calorie diet per day is $3.52 – IF that 2000-calorie diet consists of junk food. A 2000-calorie diet consisting of strictly healthy foods? $36.32. The average cost of one pound lost on Weight Watchers is $97. It’s $130-139 on NutriSystem, $131-174 on Jenny Craig, and $118-126 on a custom-fit diet plan.

According to a Harvard study, consistently choosing healthier foods over high-carb  “junk food” adds about $550 to food costs per person per year. 

As a result, 65% of Americans say the higher prices of healthy foods prevent them from eating as healthily as they would like. 

But that’s a lot less than the cost of being overweight. 

But being overweight isn’t cheap either: overweight and obese people, on average, have about $1,500 more in medical expenses each year compared to normal-weight individuals. For individuals with three chronic diseases, the average annual cost of obesity rises to over $25,000 per year.

So keeping your weight under control is worth a good deal of investment.

Sure, some people are able to control it on their own  through diet and exercise. Some people are blessed with good genes.

But some of us need a bit of help from the medical community, and to leverage the benefits of science.

As with everything involving medical care, that can be expensive.

Here’s what you can do to make it more affordable.

How to Save Money on Medical Weight Loss Programs

If you’re reading this and cringing at the costs of getting healthy (as I am while writing this), don’t be too discouraged just yet – I have a secret I’d like to share with you, one that the IRS, the government and every other insurance agency out there would like to keep well hidden.

Many medical weight loss related expenses  are actually tax-deductible… if you go about it the right way. 

This doesn’t apply to ordinary gym and fitness club memberships or health foods. You won’t get a deduction for those, as the IRS considers those to be personal expenses rather than medical costs.

But there are several ways you can pay for certain medical weight loss expenses with pre-tax dollars.

And that can be a significant moneysaver right there.

Here’s why:

The Pre-Tax Advantage: Save Money on Medically Necessary Weight Loss Treatment

With most personal expenses, you have to pay for everything with after-tax dollars.

That is, for every dollar you earn, your employer withholds about 20 to 25% of it. And then they withhold an additional 15.2% in Social Security and Medicare Taxes. And a bit more in unemployment taxes.

Even if you’re self-employed or an independent contractor or business owner, you need to be setting that money aside yourself to pay your quarterly or annual income taxes.

So when you pay with after-tax dollars, you’re already about 25% to 35% in the hole. You may only get to spend 65 to 75 cents on the dollar, after you take out taxes. 

But there are multiple ways to pay for certain medical expenses with pre-tax dollars, rather than after-tax dollars. And under some circumstances, that includes certain costs related to weight loss.

Under current law, there are three ways you can save money on weight loss programs by effectively paying with pre-tax rather than after-tax dollars: the health savings account (HSA), the flexible spending account (FSA), and the itemized medical expense deduction. 

Individual circumstances vary. But by routing your weight loss and other medical expenses through an HSA or FSA, or by taking advantage of the Itemized Medical Expense deduction, you can realize savings between 20% to 40% on eligible medical expenses. 

This estimate takes into account the federal income tax savings, as well as potential state and local tax savings, if applicable.

Here’s how it works: suppose you’re in a 25% federal tax bracket, and contribute $2,000 to an HSA. By using your HSA to pay for your weight loss treatment or other medical care, you would save up to $500 in federal taxes alone. 

Additionally, some states offer tax deductions or credits for contributions to HSAs or FSAs, providing additional savings

Of course, everyone’s tax situation is unique, and the actual savings can vary based on factors such as income level, tax deductions, tax credits, and specific tax laws in your jurisdiction.

Each of these methods allow you to pay qualified medical expenses with pre-tax dollars – provided the expenditures are necessary to treat a specific diagnosed medical condition. You can’t use them just for general wellness purposes. 

How HSAs Save Thousands on Taxes and Healthcare Costs (Slideshow)

What Weight-Loss Treatment Costs Can I Deduct?

Not everything related to your weight loss efforts is going to qualify. For example, your gym membership and healthy foods or meal substitution products generally won’t qualify (see below for more information about deducting or using HSA money for food products).

To qualify for favorable tax treatment, any weight loss program must be for the treatment of a specific disease diagnosed by a physician, such as heart disease, high blood pressure, diabetes, or obesity.

You can’t include weight loss programs for the mere purpose of improving your appearance or general sense of wellness.

But you can use your HSA or FSA or deduct the cost of other medical weight loss treatments and costs for treating many other medical conditions related to your weight. Examples include:

In most cases, you will want to ask your doctor to provide a Letter of Medical Necessity to ensure the IRS deems your weight loss-related costs to be qualified medical expenses, and therefore eligible for favorable tax treatment.

That last part is easy: if you’re struggling with weight loss, It’s usually not difficult to get your family doctor to verify that losing weight is medically necessary to treat your obesity, diabetes, or other medical condition.

As long as your physician is willing to certify that your weight loss-related costs are medically necessary, you can use any of these three tax tools to pay with pre-tax dollars.

Health Savings Accounts (HSAs) and Weight Loss Programs

A health savings account (HSA) is a tax-exempt account used solely for the purpose of paying for qualified medical expenses with pre-tax dollars

If your weight loss treatment is medically necessary according to IRS Publication 502, you can contribute pre-tax money to your HSA each year, and then use that money tax-free to pay for qualified medical expenses, including your weight loss treatment.

The health savings account is an amazingly powerful tool in the U.S. tax code that has helped millions of Americans save money on taxes, reduce their health care expenditures, and take more direct and personal control of their healthcare and that of their family members.

Here’s how they work:

    1. HSA contributions are pre-tax. You pay no taxes on money you contribute to your HSA. You also pay no taxes on money your employer contributes to your HSA.

    2. Growth of your HSA assets is tax-deferred. You pay no taxes on growth, income, interest, or capital gains. Your money compounds unmolested by taxes as long as it remains in your HSA.

    3. Tax-free withdrawals for medical costs. Any money you need to withdraw for qualified medical expenses is tax-free.

    4.Retirement kicker. Any money you don’t need for medical expenses when you reach age 65 is available to supplement your retirement income. The 20% penalty that normally applies to HSA withdrawals for non-qualified medical expenses goes away. You just need to pay income taxes on the amount you withdraw, just like a traditional IRA or 401(k).

    5.. You have the option to “self-direct” HSA investments. That is, you can keep your HSA in a conservative, money market style account, which is normally the default. Or you can use an HSA third-party administrator to invest your HSA money into stocks, bonds, mutual funds, and even real estate, if you believe you can get a better return there.

Meanwhile, you can take money out of your HSA at any time, penalty free, to pay for medical weight loss treatment. 

Eligibility

To contribute pre-tax to a health savings account, you must be enrolled in a high-deductible health plan (HDHP).

As of 2023, the IRS defines a high deductible health plan as any plan with a deductible of at least $1,500 for an individual or $3,000 for a family.

An HDHP’s total yearly out-of-pocket expenses (including deductibles, copayments, and coinsurance) can’t be more than $7,500 for an individual or $15,000 for a family. (This limit doesn’t apply to out-of-network services.).

Learn More About HSAs

How to Maximize the Value of Your HSA Account

Compare Pricing on the Best HSA Plans Available


Flexible Spending Accounts And Weight Loss Treatment

A flexible spending account is another pre-tax program that provides many of the same benefits of an HSA. However, unlike HSAs, FSAs run on a “use it or lose it” basis, and any money you put into the account that’s left over at the end of the year doesn’t roll over – it’s just gone.

But, the tax benefits are still there, and very similar – meaning that if you have a medically diagnosed condition that requires you to lose weight, you may be able to write off the expense if taken from your FSA.

Get a personalized health insurance analysis and review

How to deduct medical bills on your income tax return

What if you don’t have an HSA or an FSA and you want and need to lose weight? Can you deduct the cost of weight loss treatment on your taxes?

The answer is yes, as long as the weight loss expenses are medically necessary, they are designated a qualified medical expense according to IRS Publication 502, and that they exceed 10% of your income. 

That’s where the itemized medical expense deduction comes in. 

Here’s how it works:

Medical expenses must be eligible. 

To claim the itemized medical expense deduction, you must have incurred qualifying medical and dental expenses for yourself, your spouse, or dependents. 

These expenses must be primarily for the prevention, diagnosis, or treatment of a specific medical condition. Expenses for general health and wellness purposes for healthy individuals won’t qualify as medical expenses and would not be deductible.

But if you have a medical condition for which obesity is a risk factor, such as diabetes, heart disease, high blood pressure, back injuries, or other problems exacerbated by your weight, many weight-loss related expenses may be medically necessary, and therefore qualify for the medical expense deduction. 

Medical expenses must exceed the minimum threshold.

For most taxpayers, you can only deduct medical expenses that exceed 10% of your adjusted gross income (AGI). 

Tip: You can increase the value of this deduction by reducing your taxable income as much as possible. For example, you can contribute the maximum amount possible to other tax-deductible savings and investment vehicles, such as your 401(k), 403(b), SEP IRA, traditional IRA, or HSA accounts.

You can also try to defer taxable income into the next year, and pull some additional deductible expenditures and investments from next year into this year, if possible, to reduce your on-paper income.

For example, you can prepay advertising contracts or subscription costs, or make planned tax-deductible business expenses with a credit card this year rather than deferring them into next year, all to artificially reduce your income for this year on paper.

The lower your income is on paper, the lower your 10% of AGI threshold will be, and the more of your medical expenses will be deductible. 

Medical expenses must be non-reimbursed. 

The medical expense deduction applies to unreimbursed expenses, meaning expenses not covered by insurance or other sources. 

If you receive reimbursement for medical expenses from insurance or other parties, you can only deduct the portion of expenses that exceeds the reimbursement.

How to claim the deduction

To claim the medical expense deduction, you need to itemize deductions on your federal tax return using Schedule A.

This means you’ll forgo the standard deduction and instead list all eligible expenses, including medical expenses, along with other itemized deductions such as state and local taxes, mortgage interest, and charitable contributions.

In some cases, it may not be worthwhile to itemize. If your deductible expenses listed on Schedule A are small relative to your income, you may well be better off not trying to deduct your medical expenses, and take the standard deduction instead.

For tax year 2023, the standard deduction is $13,850 for single filers and those married filing separately, $27,700 for those married filing jointly, and $20,800 for heads of household.

If all your deductions listed on schedule A don’t exceed these thresholds, you’re better off just filing a Form 1040 or a Form 1040 EZ.

Note: Even if you don’t itemize, you can still benefit from using a health savings account, a flexible spending account, or contributing to a traditional IRA or workplace retirement plan. This is because these are “above the line” deductions. They’re taken out before your adjusted gross income is calculated.

Documentation and Records

It’s crucial to maintain proper records and documentation of your medical expenses.

This includes a letter of medical necessity from your physician.

You should also keep receipts, invoices, statements, and any other relevant documents that support your deduction.  You don’t need to submit these records with your tax return, but you should retain them in case of an audit.

If you use an HSA, your HSA custodian should provide you with a debit card. Pay your out-of-pocket medical expenses, including qualified weight loss treatment expenses, with your HSA credit card. You can then track your expenses using their website or mobile app.

Each year, your HSA custodian will provide you with a tax document that you can attach to your income tax return documenting your expenses paid using the HSA.

Note: Be sure to use your HSA account only for qualified medical expenses. Otherwise the money you spend will be subject to income taxes, as well as a severe 20% penalty if you’re under age 65.

What Weight Loss Expenses Don’t Qualify? 

General wellness expenditures

In general, you can’t deduct weight loss program costs that aren’t for the specific purpose of treating a specific medically diagnosed condition.

Expenditures just for maintaining general fitness or wellness don’t qualify. They have to be directly related to treating a specific and defined medical diagnosis in your file.

Speak with your doctor about getting a letter of medical necessity to support any deduction or planned HSA or FSA expenditure.

Gym, spa, and fitness club memberships 

Gym membership costs do not qualify as a §213(d) medical expense. They are not generally deductible as a medical expense, even with a letter of medical necessity. However, using an HSA, FSA, or the medical expense deduction for other medical expenses, including weight loss treatment can offset the cost of your fitness club membership or even home fitness equipment, making it much more affordable. 

Similarly, because gym memberships don’t qualify as a §213(d) medical expense,, any employer payment for or reimbursement of a gym membership fee is counted taxable income to employees, and subject to withholding and payroll tax requirements. 

The cost of diet foods and/or beverages (i.e. diet soda, fiber bars, etc.)

In most cases, these are personal expenses, not medical expenses, and not generally deductible or allowable for HSAs and FSAs as qualified medical expenses.

You can only deduct the cost of special foods as a medical expense if all of the following criteria apply:

  1. The food does not satisfy normal nutritional needs,
  2. The food treats a diagnosed illness or mitigates its symptoms, and
  3. A physician determines that this special food is medically necessary. 

Can I take the medical expense deduction even if I use an HSA?

Yes. You can maximize your tax benefit and your savings by using an HSA, an FSA, and the medical expense deduction all in the same year. The catch: you can only deduct any dollar once.

One strategy is to contribute to an HSA and use those dollars to pay for your medical expenses as much as possible. 100% of your HSA expenditures to pay for qualifying medical expenses will be with pre-tax dollars, regardless of your income level, and regardless if you itemize.

Your HSA contributions are not subject to income tax, and reduce your taxable income. They therefore lower your 10% of AGI threshold.
So if you still have unreimbursed medical expenses after using your available HSA funds, you can then deduct the rest using the medical expense deduction. 

Because you’ve lowered your AGI by the amount of your HSA contribution and other tax deductions, you’ve lowered your 10% threshold. So you’ll be able to deduct even more of your remaining qualified medical expenses. 

So take advantage of that HSA or FSA if you can. And if you want to look at another HSA-qualified health insurance option to see if you can save some money, contact one of our highly trained Personal Benefits Managers today.

We’ll help you analyze your options. And we’ll do it for free.

Here are some additional articles to help you save money: Healthcare Sharing Programs: A Legal Way to Opt Out of Obamacare and Save Significantly | 7 More Ways to Save on Your Medical Costs

Additional Resources

 IRS Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans

IRS Publication 502 – Medical and Dental Expenses

State Tax Treatment of HSAs

Frequently Asked Questions About Taxes and Weight Loss Expenses

Q:Are weight loss treatments tax-deductible?

A: Weight loss treatments are generally not tax-deductible, as they are considered personal expenses. However, there are some exceptions if the treatment is prescribed by a physician to treat a specific medical condition, such as obesity, diagnosed by a healthcare professional.

Q: Can I use funds from my Health Savings Account (HSA) or Flexible Spending Account (FSA) to pay for weight loss treatments?

A: In general, weight loss treatments are eligible for reimbursement from HSAs or FSAs provided they are prescribed by a healthcare professional to treat a specific medical condition. 

Q: Can I use my HSA or FSA to pay for a gym membership?

A: Under current IRS regulations, gym memberships are generally not considered eligible expenses for HSAs or FSAs. However, some employers may offer wellness programs that provide a separate reimbursement for gym memberships. This reimbursement would generally be taxable as income. 

Check with your employer or HSA/FSA administrator for specific guidelines.

Q: Can I use my HSA or FSA to purchase dietetic foods or meal replacement products?

A: In general, the cost of dietetic foods or meal replacement products is not eligible for reimbursement from HSAs or FSAs, as they are considered personal expenses for general health or well-being. However, certain dietetic foods might be eligible if prescribed by a healthcare professional to treat a specific medical condition, such as diabetes or a diagnosed metabolic disorder.

Q: Can I claim a tax deduction for a weight loss program recommended by my healthcare professional?

A: If a weight loss program is recommended by a healthcare professional to treat a specific medical condition, such as obesity or hypertension, the associated expenses may be tax-deductible as medical expenses. If your doctor confirms it’s a medically necessary expense, you can use your HSA or FSA to pay for it.

However, if you’re claiming a deduction on Schedule A of your federal income tax return, you can only deduct these costs if they exceed the applicable threshold based on your adjusted gross income (AGI). Consult with a tax professional to determine if your weight loss program qualifies.

Q: Can I claim a tax deduction for prescription medications related to weight loss?

A: Prescription medications specifically prescribed for weight loss treatment may be eligible for a tax deduction as a medical expense. You should keep detailed records and receipts of the prescription medications, and they must exceed the applicable threshold based on your AGI.

Q: Are bariatric surgeries tax-deductible?

A: Bariatric surgeries, such as gastric bypass or gastric sleeve, may be tax-deductible if they are prescribed by a healthcare professional to treat a diagnosed medical condition, such as obesity. The associated expenses, including hospital fees, surgeon fees, and related medical costs, may be deductible as medical expenses if they exceed the applicable threshold based on your AGI.

Q: Can I claim a tax deduction for weight loss programs or treatments not covered by insurance?

A: If weight loss programs or treatments are not covered by insurance but are prescribed by a healthcare professional to treat a specific medical condition, you may be able to claim a tax deduction for the associated expenses as medical expenses. They must exceed the applicable threshold based on your AGI.

Q: Can I include transportation expenses to and from weight loss treatments as medical deductions?

A: Transportation expenses related to weight loss treatments, such as mileage to doctor appointments or bariatric surgeries, may be deductible as medical expenses. You can calculate the deduction based on the standard mileage rate set by the IRS or the actual costs incurred, including parking fees and tolls.

Q: Are over-the-counter weight loss products or supplements tax-deductible?

A: Over-the-counter weight loss products or supplements are generally not tax-deductible as medical expenses, even if they are used for weight management. However, certain products might be eligible if prescribed by a healthcare professional to treat a specific medical condition.

Q: Can I claim a tax deduction for the cost of weight loss counseling?

A: Weight loss counseling may be a qualified medical expenses provided it is specifically prescribed by a healthcare professional to treat a diagnosed medical condition. That means you can use your HSA or FSA to pay for them with tax-free dollars. 

You can also deduct them as itemized expenses, but only to the extent your combined eligible medical expenses exceed 10% of your AGI.  

Q: What documents should I keep as proof for weight loss treatment-related expenses?

A: It’s important to maintain proper documentation for weight loss treatment-related expenses. Keep records such as itemized bills, receipts, invoices, statements, and prescriptions that clearly show the nature of the expense, the date, and the amount paid. Also, retain any documentation from healthcare professionals prescribing or recommending the treatment

Q: Can I claim weight loss expenses for both myself and my spouse if we file jointly?

A: Yes, you can claim weight loss expenses for both yourself and your spouse if you file a joint tax return. You should combine all eligible medical expenses for both individuals to determine if they exceed the applicable threshold based on your joint AGI.

Q: What is the minimum threshold for claiming medical expense deductions on Schedule A?

A: The minimum threshold for claiming medical expense deductions on Schedule A is based on your adjusted gross income and is 10% for most taxpayers. 

Q: Are there any state-specific tax considerations related to weight loss treatment expenses?

A: State tax laws may vary, and some states conform to federal tax laws while others have different rules regarding medical expense deductions. California does not allow a state tax deduction for contributions to an HSA.

Disclaimer

HSA For America does not provide tax advice. This information is for general informational purposes only and should not be construed to be tax advice. For information specific to your situation, you should consult with a tax professional familiar with the tax laws in your specific state to understand any state-specific considerations for weight loss treatment-related expenses.