HSA & FSA Eligibility: What Medical Supplies Qualify

Understand the Ground Rules: IRS Publication 502

Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) let you pay for qualified medical expenses with pre-tax dollars. The IRS defines what counts as a qualified medical expense in Publication 502, and that definition is more specific than most people expect.

The core standard: an expense qualifies if it is for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for treatments affecting any structure or function of the body. General health maintenance, cosmetic purposes, and personal comfort items do not meet that bar, even if a doctor recommends them.

A few structural differences matter before you shop:

• HSA funds roll over year to year and stay with you if you change jobs. You must be enrolled in a qualifying High Deductible Health Plan (HDHP) to contribute.
• FSA funds are generally use-it-or-lose-it by year end, though some plans allow a grace period or limited rollover. Confirm your plan's deadline before December.
• Both account types accept the same IRS-defined list of eligible expenses. The eligibility rules are the same; the account mechanics differ.

When in doubt about whether a specific condition or treatment qualifies, consult your plan administrator or a tax professional. The IRS rules are the floor; individual plan documents can be more restrictive.

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Common OTC Medical Supplies That Are Generally Eligible

The CARES Act of 2020 permanently expanded HSA and FSA eligibility to include most over-the-counter drugs and medicines without requiring a prescription. It also clarified eligibility for many supply categories. The following items generally qualify:

Wound care and first aid:

• Adhesive bandages, gauze pads, and medical tape
• Antiseptic wipes and wound irrigation solutions
• Elastic bandages and cohesive wrap
• Sterile gloves used for wound care

Monitoring devices:

• Blood pressure monitors (automatic cuff-style units)
• Blood glucose meters and lancets
• Pulse oximeters
• Digital thermometers (oral, ear, forehead)
• Peak flow meters for asthma management

Diabetes management supplies:

• Test strips
• Insulin syringes and pen needles
• Continuous glucose monitor (CGM) sensors and receivers
• Insulin storage cases

Respiratory and breathing aids:

• Nebulizers and replacement tubing
• CPAP machines, masks, and filters (when prescribed or used to treat a diagnosed condition)
• Spacers for metered-dose inhalers

Incontinence and ostomy supplies:

• Incontinence briefs and underpads used for a medical condition
• Ostomy pouches, wafers, and related accessories

Orthopedic and mobility supports:

• Wrist, knee, and ankle braces for injury recovery or diagnosed conditions
• Crutches and canes
• Hot and cold therapy packs used for a diagnosed condition

This list is representative, not exhaustive. If you are managing a specific diagnosis and unsure whether a supply is eligible, ask your plan administrator for a written confirmation before purchasing.

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What Does NOT Qualify (And Why It Gets Confusing)

The IRS disqualifies items that primarily serve a general health, cosmetic, or personal hygiene purpose, even when those items have obvious health value. Common examples that do not qualify include:

• Vitamins and supplements taken for general wellness (not prescribed to treat a diagnosed deficiency)
• Cosmetic procedures and products
• Teeth whitening products
• Moisturizers, lip balms, and sunscreen used for general use (note: sunscreen of a sufficiently high SPF generally qualifies under current IRS guidance when used to prevent skin damage from sun exposure — consult IRS Publication 502 for current details)
• Gym memberships, fitness trackers, or exercise equipment for general fitness
• Air purifiers purchased for general comfort rather than a diagnosed respiratory condition
• Baby monitors, diapers, and formula (these serve general parenting purposes, not a medical condition)

The gray area: items that could serve a medical purpose but are commonly used for general wellness. A humidifier might be eligible if prescribed to treat a specific respiratory condition and purchased with supporting documentation. The same humidifier bought for general comfort is not eligible. When an item sits in this gray area, a Letter of Medical Necessity (LMN) from your treating clinician can support your claim.

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When You Need a Letter of Medical Necessity

A Letter of Medical Necessity is a signed statement from a licensed healthcare provider explaining that a specific item or service is required to treat a diagnosed medical condition. It is not a prescription, but it carries similar weight for HSA and FSA documentation purposes.

You may need an LMN for:

• Orthopedic braces or supports purchased outside of a clinical setting
• Air purifiers, humidifiers, or dehumidifiers for a respiratory diagnosis
• Special mattresses or bed wedges for acid reflux or spinal conditions
• Exercise equipment prescribed as part of a defined rehabilitation plan

The LMN should include: the patient's name, the diagnosed condition, the specific item recommended, and the clinician's signature and contact information. Keep the original with your tax records. Do not rely on verbal confirmation from your provider.

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Keep Your Receipts: Documentation That Protects You

The IRS requires that you be able to substantiate every HSA or FSA expense if audited. Inadequate documentation is one of the most common reasons distributions are reclassified as taxable income with penalties.

What to save:

• Itemized receipts showing the product name, date of purchase, and amount paid. A credit card statement alone is generally not sufficient.
• Explanation of Benefits (EOB) documents from your insurer when applicable.
• Letters of Medical Necessity for any borderline items.
• Prescription copies if a prescription was required.

Practical habits:

• Photograph or scan receipts immediately after purchase. Paper receipts fade.
• Create a dedicated folder, either physical or cloud-based, organized by tax year.
• Record the purpose of each purchase if the product name is not self-explanatory.
• Hold records for a minimum of three years from the filing date of the return on which the expense appeared (per IRS general record-keeping guidance).

If you use an HSA debit card, many banks generate a year-end statement. That statement is useful for reconciliation but is generally not a substitute for itemized receipts.

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Shop Smarter: Practical Tips for Using HSA and FSA Dollars

Buy before your FSA deadline. FSA funds typically expire on December 31 or shortly after. Stock up on eligible supplies you know you will use before the deadline rather than losing the balance.

Verify eligibility before checkout. When shopping online, look for an "HSA/FSA eligible" label on product listings. These labels are useful but not a guarantee. Cross-check against IRS Publication 502 or your plan documents for high-cost items.

Avoid double-dipping. If your insurance reimburses an expense, you cannot also pay for it with HSA or FSA funds. Doing so disqualifies the distribution.

Separate personal and HSA purchases. If you buy both eligible and ineligible items in one transaction, you can pay the eligible portion with your HSA card and the rest separately. Most retailers can split payment.

Check your plan's approved vendor list. Some FSA plans require purchases from specific retailer categories for automatic approval. Buying from an unlisted vendor does not make the item ineligible, but it may trigger a manual review requiring additional documentation.

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At a Glance: Quick Reference

• Generally eligible: Bandages, blood pressure monitors, blood glucose meters and strips, thermometers, nebulizers, CPAP supplies, lancets, ostomy supplies, braces for diagnosed conditions, pulse oximeters
• Generally not eligible: Vitamins for general wellness, cosmetic products, gym memberships, fitness trackers, baby supplies, general comfort items
• Gray area items (air purifiers, specialized equipment): get a Letter of Medical Necessity from your clinician
• CARES Act (2020): OTC drugs and medicines no longer require a prescription to be generally eligible
• Documentation required: Itemized receipts, LMNs where applicable; keep records for at least three years per IRS general record-keeping guidance
• FSA users: Know your plan's deadline and spend down before year end
• When unsure: Contact your plan administrator or a tax professional before purchasing