# Qualified Medical Expenses (QME) for HSA Distributions What counts as a QME determines whether an HSA distribution is taxable. The definition comes from IRC §213(d) and is detailed in Pub 502 (with HSA-specific overlays in Pub 969). This file is the agent's lookup for whether a specific expense qualifies. --- ## The legal definition **IRC §213(d)(1)**: "medical care" means amounts paid: (A) for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body; (B) for transportation primarily for and essential to medical care referred to in (A); (C) for qualified long-term care services; OR (D) for insurance covering medical care referred to in (A) or (B), or for any qualified long-term care insurance contract. The HSA-specific QME definition (IRC §223(d)(2)(A)) cross-references §213(d) but with **additional restrictions**: - **Health insurance premiums are GENERALLY NOT QME**, except: - COBRA continuation coverage premiums - Health insurance while receiving unemployment compensation - Medicare and other health care coverage premiums if the account holder is 65 or older (Parts A, B, D and Medicare Advantage; NOT Medigap supplemental policies) - Long-term care insurance premiums (subject to age-based caps in IRC §213(d)(10): 2025 $480 / $900 / $1,800 / $4,810 / $6,020 by age band ≤40 / 41–50 / 51–60 / 61–70 / 71+, Rev. Proc. 2024-40; 2026 $500 / $930 / $1,860 / $4,960 / $6,200, Rev. Proc. 2025-32) - For months after December 31, 2025: direct primary care fees up to $150 a month ($300 if more than one person) (IRC §223(d)(2)(C); Notice 2026-5) This is a frequent source of confusion. Most insurance premiums are NOT QME, even though they would be deductible as medical expenses on Schedule A. --- ## Common QME (always allowed) ### Doctor and dental services - Doctor visits (primary care, specialists) - Dental care: cleanings, fillings, extractions, root canals, crowns, dentures, orthodontics - Vision: eye exams, glasses, contact lenses, contact solution, corrective surgery (LASIK, PRK) - Mental health: psychiatrist, psychologist, therapist (LCSW, LMFT) - Hospital stays, ER visits - Surgery - Chiropractor - Physical therapy - Occupational therapy ### Prescriptions and medications - **Prescription drugs** (always) - **Insulin** (always — even without a prescription) - **Over-the-counter medications** — qualified since the 2020 CARES Act (e.g., ibuprofen, acetaminophen, allergy medications) - **Menstrual care products** — qualified since 2020 CARES Act (tampons, pads, cups) ### Medical equipment - Crutches, walkers, wheelchairs, hospital beds (rented or purchased) - CPAP machines and supplies - Blood glucose monitors, test strips, lancets - Hearing aids and batteries - Bandages, first aid supplies ### Specific situations - **COBRA premiums**: yes - **Medicare Part B / D premiums**: yes (but ONLY when the user is age 65+ AND enrolled in Medicare) - **Long-term care services and insurance premiums**: yes, with age-based caps for premiums (IRC §213(d)(10)) - **Premiums while receiving unemployment**: yes - **Medical aids for special-needs children**: yes (many such items qualify) - **Smoking cessation programs**: yes (counseling, nicotine patches OTC) - **Weight loss programs**: yes IF directed by a physician for a specific disease (not general weight loss) - **Lactation consultants and breast pumps**: yes (IRS Announcement 2011-14) --- ## Common NON-QME (always disallowed) - **Cosmetic procedures**: face lift, hair transplant, teeth whitening, breast augmentation (unless reconstructive) - **General health items**: gym memberships, vitamins (unless prescribed for a specific medical condition) - **Personal care items not health-related**: shampoo, soap, deodorant, sunscreen for general use - **Toothpaste, mouthwash, dental floss** (general hygiene, not treatment) - **Health insurance premiums** for the user's own HDHP (the very plan that makes them HSA-eligible) - **Premiums for individual health insurance** other than the COBRA / unemployment / Medicare exceptions - **Funeral expenses**: never (not medical care) - **Babysitting / childcare while parents are away from home for medical reasons**: no - **Diapers** (regular adult or baby): no - **Maternity clothes**: no - **Toiletries and grooming**: no --- ## Gray-area items (verify with professional) ### Marijuana / CBD - **Medical marijuana**: NOT QME at the federal level, even where state-legal. Federal Schedule I status precludes IRC §213(d) qualification. - **CBD products with THC**: NOT QME federally. - **Hemp-derived CBD oil sold OTC**: arguable, but most custodians and CPAs treat as NOT QME without a specific FDA-approved drug status. ### Nutritional supplements - **Multivitamins**: NOT QME for general health - **Vitamins prescribed for specific medical conditions** (e.g., prenatal vitamins, vitamin D for deficiency): QME with a Letter of Medical Necessity (LMN) from the physician ### Weight loss - General "lose weight" programs (Weight Watchers, etc.): NOT QME for general weight loss - Weight loss prescribed by a physician for a specific disease (obesity diagnosis, hypertension): QME with LMN ### Fertility - IVF, IUI, fertility medications: QME - Egg/sperm freezing for non-medical reasons: NOT QME - Egg/sperm freezing prior to chemotherapy: QME - Surrogate compensation: usually NOT QME (the surrogate's own medical expenses are not the user's QME) ### Travel and lodging for medical care - **Transportation to medical care**: QME (mileage at the medical mileage rate — 2025: 21¢/mile; 2026: 20.5¢ January–June and 23.5¢ July–December, per https://www.irs.gov/tax-professionals/standard-mileage-rates) - **Lodging while away from home for medical care**: QME up to **$50/night per person** (IRC §213(d)(2)) — only if for medical care of the patient and not "lavish or extravagant" - **Meals while traveling for medical care**: NOT QME (per IRS Pub 502) ### Dependent care vs. medical care - **Adult day care for a chronically ill dependent**: typically NOT QME (use Dependent Care FSA / Form 2441 child and dependent care credit instead) - **Memory care / dementia-specific facility**: QME (qualified long-term care) ### Dental orthodontics - **Braces, Invisalign, retainers**: QME - **Cosmetic teeth whitening**: NOT QME ### Mental health - Talk therapy with licensed provider: QME - Marriage counseling: NOT QME (not a medical condition unless tied to a specific mental health diagnosis) - Wellness coaches without medical license: NOT QME --- ## Timing rules ### When can the QME be incurred? QME must be incurred **after the HSA was established**. State trust law sets that date; most states require the account to hold an asset, so the HSA is usually established when first funded, not when the paperwork was signed (Notice 2008-59 Q&A-38). An HSA funded by a rollover or transfer from another HSA or an Archer MSA keeps the earlier account's establishment date (Q&A-40). The IRS in Notice 2004-50 Q&A 39 confirmed: - **No time limit on reimbursement**: a user can pay a QME in 2025 and reimburse themselves from the HSA in 2030 (with receipts retained) - **But the QME must be after HSA establishment**: a 2020 medical bill cannot be reimbursed from an HSA opened in 2022 ### "Shoebox method" A common HSA strategy: pay current QMEs out-of-pocket, retain receipts, let the HSA grow tax-free. Reimburse self decades later. The IRS allows this — Notice 2004-50 Q&A 39. The user must: - Retain receipts indefinitely (not just 3 years — until the reimbursement is taken, plus 3 more years) - Track which receipts have been reimbursed and which haven't (some HSA portals offer this; many users build their own spreadsheet) - Take the reimbursement as a "Code 1 normal distribution" with the QME receipts substantiating the QME portion --- ## Substantiation requirements The IRS does **not** require the HSA custodian to verify QME at the time of distribution. The custodian disburses on the user's request without checking. The user is on the honor system. But the IRS **does** require the user to retain receipts and substantiate QME if audited. The audit window is generally 3 years from filing date (IRC §6501) but can extend longer if substantial under-reporting is alleged. Receipts should show: - Date of service / purchase - Provider name and address - Patient name (the HSA holder, spouse, or tax dependent) - Description of service or product - Amount paid For OTC items, a register receipt with item description suffices. For Rx, the pharmacy receipt or insurance EOB. For services, the provider's invoice or EOB. --- ## Whose medical expenses qualify? QME from the HSA can cover: - The HSA holder - The HSA holder's **spouse** (married filing jointly OR married filing separately — does NOT require joint filing) - The HSA holder's **dependents**, plus anyone who would be a dependent except that they filed a joint return, had gross income above the limit, or the holder (or spouse) can be claimed as someone else's dependent (2025 Instructions for Form 8889, Line 15) - A **child of divorced, separated, or living-apart parents** (last 6 months of the year) is treated as the dependent of both parents (same instructions) NOT covered: - Domestic partners (unless a dependent or would-be dependent under the rule above) - Adult children who are neither (note: the Affordable Care Act rule allowing children up to age 26 on a parent's HDHP does not decide this) **Common error**: a parent uses their HSA to pay for their self-supporting 25-year-old's medical bills. A non-student 25-year-old who is not permanently disabled is not a qualifying child, and if the parent did not provide over half of the child's support, the child is not a would-be qualifying relative either. The parent's distribution is NON-QME, taxable + 20% penalty. ASK about support before deciding. --- ## Authority cited - IRC §213(d) — definition of medical care - IRC §213(d)(10) — long-term care insurance premium caps (age-based) - IRC §223(d)(2)(A) — HSA QME definition - IRC §223(f)(1) — taxation of non-QME distributions - IRC §6501 — IRS audit window (3 years general) - IRS Pub 502 — Medical and Dental Expenses (https://www.irs.gov/publications/p502) - IRS Pub 969 — HSAs and Other Tax-Favored Health Plans (https://www.irs.gov/publications/p969) - IRS Notice 2004-50 — HSA Q&A guidance (Q&A 39: no reimbursement time limit) - IRS Announcement 2011-14 — breast pumps and lactation supplies as QME - CARES Act 2020 — added OTC and menstrual products to QME - IRS standard mileage rates page — 2025 medical rate 21¢ (IR-2024-312); 2026 20.5¢ Jan–Jun (IR-2025-128) and 23.5¢ Jul–Dec (IR-2026-29) - Notice 2008-59 Q&A-38 / Q&A-40 — HSA establishment date - Notice 2026-5 — direct primary care fees (2026+) ## Verify before filing - Recent IRS guidance on emerging items (telehealth, GLP-1 weight loss drugs, fertility treatments, gender-affirming care) — these areas evolve - Whether the user's specific item has a Letter of Medical Necessity if it's gray-area - Medical mileage rate for the year being filed (2026 changed mid-year)