IRS Warning Regarding Personal Health and Wellness Expenses

1.5 minute read

The IRS issued a bulletin which reminds taxpayers that tax-advantaged medical savings accounts (health flexible spending accounts (FSAs), health reimbursement arrangements (HRAs), and health savings accounts (HSAs)) cannot cover personal health and wellness expenses. The IRS is concerned about companies misleading taxpayers on health expenses reimbursable by medical savings accounts.

Qualified Medical Expenses

Health FSAs, HRAs, and HSAs cover out-of-pocket costs for medical expenses to alleviate physical or mental conditions. This includes payments for medical services, equipment, medicines, and drugs prescribed by a physician. Expenses for general health benefits are not covered.

Nutrition, Wellness, and General Health Expenses

The IRS FAQs specify that costs for nutrition, wellness, and general health are qualified medical expenses in very limited circumstances. For instance, nutritional counseling or weight-loss programs qualify if treating a diagnosed disease like obesity or diabetes. Nutritional supplements must be recommended for a specific medical condition by a practitioner. Additionally, weight-loss food or beverages qualify if not meeting normal nutritional needs and treating an illness, backed by a physician's recommendation. Exercise for general health improvement, like swimming or dance, is not a qualified medical expense. Gym memberships qualify if purchased solely for body function improvement or treating a diagnosed disease.

IRS’ Warning

The IRS warns against companies falsely claiming nutrition, wellness, and general health expenses as reimbursable medical expenses through FSAs, HRAs, or HSAs. Companies may misleadingly suggest that doctor's notes based on self-reported health information can convert nonmedical expenses into qualified medical ones. Download the bulletin for more details.