In a recent announcement made on March 6th, 2024, the Internal Revenue Service (IRS) issued a stern reminder to taxpayers and health spending plan administrators regarding the eligibility of general health and wellness expenses for reimbursement under the tax law. Amid growing concerns over misleading advertisements, the IRS clarified that personal expenses for general health and wellness do not qualify as medical expenses, thus are not deductible or reimbursable under various health spending arrangements.
The IRS Commissioner emphasized the importance of adhering to the rules governing health-related expenditures. The commissioner issued a stark warning for consumers who are using their FSA or HSA benefit card for expenses such as food for weight loss, exercise equipment, gym memberships, supplements, and more. While acknowledging the legitimate place of medical expenses within the tax law, the commissioner cautioned against misleading marketing tactics from health and wellness companies advertising their FSA or HSA eligibility.
One of the tactics that the IRS believes to be misleading involves companies claiming that doctor’s notes, based solely on self-reported health information, can convert non-qualified medical expenses into qualified medical expenses eligible with your FSA or HSA benefit card. However, the IRS clarified that such documentation does not establish the necessary connection to a diagnosis-specific activity or treatment, rendering these personal expenses ineligible for reimbursement. Additionally, health plans that approved these types of expenses are at risk of disqualifying their plans in the eyes of the IRS, and all reimbursements, even for actual medical expenses, are includible in taxable income.
In a related development, companies like Truemed have been partnering with brands offering services that enable customers to obtain letters of medical necessity from virtual doctors by filling out simple health questionnaires. These letters of medical necessity are often utilized to justify purchases of health-related items, including nutrition based meal plans, gym memberships, fitness trackers, saunas, cold plunges and dietary supplements. Consumers will provide these letters and their receipt to their FSA and HSA plan holder for reimbursement. This allows customers to use tax-free funds for purchases that typically would not qualify.
Despite notes being written by virtual doctors, the IRS has raised concerns about the validity of these letters, particularly when they result from interactions that are not face-to-face. The agency stipulates that medical letters should generally stem from relationships consumers have with their existing primary care physician in an in-person / clinical setting.
The IRS’s guidance emphasizes that pretax funds from HSAs and FSAs cannot be used for expenses promoting “general health and wellness” unless they meet strict criteria for medical necessity. While the IRS has published guidance on eligible medical expenses, some gray areas remain regarding what qualifies under these accounts. You can find more information below taken from the IRS’ FAQ about medical expenses related to nutrition, wellness, and general health:
- Is the cost of nutritional counseling considered a medical expense that can be paid or reimbursed with an HSA or FSA benefit card?
- Yes, if the nutritional counseling is prescribed by a physician for the purposes of treating a medical condition.
- Is the cost of a weight-loss program considered a medical expense that can be paid or reimburse with an HSA or FSA benefit card?
- Yes, if the program is prescribed to treat a specific medical condition diagnosed by a physician such as diabetes, hyper tension, or heart disease.
- Is the cost of a gym membership a medical expense that can be paid or reimbursed by an HSA or FSA benefit card?
- Sometimes gym memberships can be considered an eligible expense if prescribed by a physician to treat a medical condition (obesity, diabetes) or as prescribed treatment / regimine for an injury (physical therapy for an injury).
- Is the cost of exercise or exercise equipment for the improvement of general health and wellness considered a medical expense that can be paid or reimbursed with an HSA or FSA benefit card?
- No, even if recommended by a doctor, the cost of exercise such as dancing lessons, swimming lessons, a volleyball league, are not eligible.
- Is the cost of food or beverages purchased for weight loss or other health reasons considered a medical expense that can be paid or reimbursed by an HSA or FSA benefit card?
- Yes, if the food or beverage doesn’t satisfy normal nutritional needs, alleviates or treats an illness, and the need is substantiated by a doctor — a portion of the purchase may be eligible for FSA and HSA reimbursement. The monetary difference between this product and a product that provides nutritional benefit is eligible.
Consumers are urged to exercise caution when considering reimbursement claims for personal health expenses and to verify the eligibility of such expenses under the tax law before submitting claims to health spending plans. As always, FSA Guide recommends going over any potential purchases with your plan administrator to get their take so both you and the plan administrator remain in compliance with IRS regulations. By staying informed and vigilant, individuals can avoid falling victim to misleading advertising and make sure that you’re able to utilize 100% of your pre-tax dollars! Looking for places that only sell 100% FSA eligible product? Check out our reviews of sites like BuyFSA.com and FSAstore.com!
What are your thoughts? Should the IRS start to include expenses like gym memberships, healthy food and nutrition, vitamins and supplements, saunas, and cold plunges? Comment down below!
IRS alert: Beware of companies misrepresenting nutrition, wellness and general health expenses as medical care for FSAS, hsas, HRAS and msas. Internal Revenue Service. (n.d.). https://www.irs.gov/newsroom/irs-alert-beware-of-companies-misrepresenting-nutrition-wellness-and-general-health-expenses-as-medical-care-for-fsas-hsas-hras-and-msas