Non-Deductible Expenses

The IRS and the Federal Courts have deemed certain medical and healthcare expenses to be non-qualified for reimbursement through Health Savings Accounts (HSA). If you make a withdrawal for non-qualified health care expenses, a penalty of 20% plus ordinary income taxes will be due on the amount used.

Please note that DataPath, Inc. does not intend this list to be comprehensive tax advice. For more detailed information, please consult IRS Publication 502 or see your tax advisor.

Non-Deductible Medical Expenses

  • Advance payment for services to be rendered next year
  • Athletic club membership
  • Automobile insurance premium allocable to medical coverage
  • Boarding school fees
  • Bottled water
  • Commuting expenses of a disabled person
  • Cosmetic surgery and procedures
  • Cosmetics, hygiene products, and similar items
  • Funeral, cremation, or burial expenses
  • Health programs offered by resort hotels, health clubs, and gyms
  • Illegal operations and treatments
  • Illegally procured drugs
  • Maternity clothes
  • Premiums for life insurance, income protection, disability, loss of limbs, sight or similar benefits
  • Social activities
  • Special foods and beverages
  • Stop-smoking programs
  • Travel for general health improvement
  • Weight loss programs

Non-Deductible Over-the-Counter Drugs

EFFECTIVE 1/1/2011, OVER-THE-COUNTER medicines will no longer be reimbursable from an FSA, HRA, or HSA without a doctor’s prescription.

Under federal healthcare regulations, over-the-counter drugs may only be purchased with health plan funds if the participant has a prescription for that particular item.  If you make a withdrawal for non-qualified health care expenses, a penalty of 20% plus ordinary income taxes will be due on the amount used.

  • Toiletries (including toothpaste)
  • Acne treatments
  • Lip balm
  • Cosmetics (including face cream and moisturizer)
  • Suntan lotion
  • Medicated shampoos and soaps
  • Vitamins (daily)
  • Fiber supplements
  • Dietary supplements
  • Weight-loss drugs for general well being
  • Herbs