health spending accounts
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DinosaurWalk
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ClickyKeys said:
Oops. I meant to say "psychological". Your absolutely right. Psychological has to do with mental state and the mind (hence the beginning of the word psych) and physiological has to do with the body or the physical state. It was late and I was in a hurry as I was about to head to bed. I should have known better. I fully know the difference between physiological and psychological. I just had an idiot moment. I apologize for the oversight and not proofing my post before hitting the submit button.
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ClickyKeys said:
I'm not sure this is true. The rules for these type of accounts are set by the IRS in terms of how much money you can put into them and what qualifies and what does not. I've used health flexible spending accounts through my employer for years and if you don't use the money you put into it throughout the year, you lose it. It's gone. Maybe that's different with an HSA?
The company administrating my health FSA always asked for a doctors note for incontinent purchases. IRS rules state they only qualify as medical expenses under a doctors order. A few years back the feds tightened up what you could use for medical expenses and what you could not. People were using these accounts to buy just about everything at the pharmacy. Now days some things don't qualify. Yet adult diapers have always required a note (unless the company administering the FSA is not on top of things and they usually are because they have to cover their ass).
WillWheatThins
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I used my Flexible Spending Account for years to buy diapers from XP Medical. Not once did I ever get asked for a receipt or doctor's note... I imagine if the bank statement said Tykables, you'd have a different situation.
That said, the insurance company I worked for was also providing the coverage, and I'm not sure how lax they were with approving items like this for employees.
That said, the insurance company I worked for was also providing the coverage, and I'm not sure how lax they were with approving items like this for employees.
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:detective3 First of all, I am assuming the OP is referring to the situation in the U.S., and not another country. If so, and you are willing to simply take my word on this... NO you cannot receive a tax savings on diapers unless you have a doctors diagnosis for needing them.
But if you want to know why this is the case, here are the reasons and references for this...:educate:
Health Savings Accounts (HSAs) and Flexible Spending Arrangements (FSAs) are programs that are meant to provide a way to put your own money into an account for medical expenses. Usually it is through your employer, who offers these services through an independent program or organization that is authorized to do so.
The intent is to allow the user to put their own money into the account for use on medical expenses. This allows for budgeting for medical expenses, but the IRS also allows for a tax-free benefit on expenses that are incurred for "qualified medical expenses". Depending upon your tax rate, this could be a substantial savings.
Okay, I know that others have already kind of shared some good information on this thread, but there needs to be a distinct realization of what the actual benefits might be, as well as the differences between an HSA and an FSA. In addition, what benefits might there be in purchasing diapers and claiming them through these accounts.
According to the IRS...
HEALTH SAVINGS ACCOUNTS
Publication 969 states...
Soooo... if you are looking to use your HSA to save money because of a tax-free benefit associated with the HSA, you can only receive this benefit if it is a "qualified medical expense".
The IRS publication on what is a "qualified medical expense" is pretty clear. In IRS publication 502 (which outlines what qualified medical expenses are) it states:
Hence, unless you are diagnosed as incontinent and have a Rx from a doctor, there is no benefit from claiming diapers on your HSA as legally there is no tax-exemption allowed on diapers without being needed to relieve the effects of a particular disease. While it might be beneficial to have a savings account where you are budgeting for the expense, there is no savings associated with it, period. If you are receiving this benefit because the trustee running your HSA account doesn't require a Rx, well, if you are ever audited by the IRS you would likely have to repay the tax savings you received.
FLEXIBLE SPENDING ARRANGEMENTS (FSAs)
FSAs are typically more restrictive than HSAs. According to IRS publication 969...
Hence, the restrictions are a bit greater, in that you will not be reimbursed for the expense unless it is for a "qualified medical expense", which again according to IRS publication 502 states that, "You can't include in medical expenses the amount you pay for diaper or diaper services, unless they are needed to relieve the effects of a particular disease."
--So, with an FSA you won't even be reimbursed for the diaper costs period unless you can demonstrate it was due to incontinence associated with a particular disease or need.
I hope this may resolve the OPs original question.
The bottom line...
YOU CANNOT LEGALLY RECEIVE AN IRS TAX BENEFIT OR SAVINGS ON PURCHASES OF DIAPERS UNLESS YOU HAVE DOCUMENTATION FROM A DOCTOR THAT IT IS REQUIRED TO RELIEVE THE EFFECTS OF A PARTICULAR DISEASE
(in layman's terms... a doctor gives you a Rx or written diagnosis of being incontinent).
The only benefit you might have if you are not incontinent, is that if you have an HSA, it might be convenient for budgeting to pay for these through this savings account as it is typically automatically taken out of your paycheck. But there is no savings, just extra paperwork. And with a FSA, you are not even able to claim diapers as an expense and be reimbursed unless you are incontinent.
For more information on the subject, please check out the IRS websites:
https://www.irs.gov/publications/p969/ar02.html#en_US_2016_publink1000204174
https://www.irs.gov/pub/irs-pdf/p502.pdf
I know this may seem like overkill, but I wanted to provide the actual policy and directives so that there was no confusion as to whether this was opinion, interpretation, or actual rules to this.
:detective3 TeddyBearCowboy
But if you want to know why this is the case, here are the reasons and references for this...:educate:
Health Savings Accounts (HSAs) and Flexible Spending Arrangements (FSAs) are programs that are meant to provide a way to put your own money into an account for medical expenses. Usually it is through your employer, who offers these services through an independent program or organization that is authorized to do so.
The intent is to allow the user to put their own money into the account for use on medical expenses. This allows for budgeting for medical expenses, but the IRS also allows for a tax-free benefit on expenses that are incurred for "qualified medical expenses". Depending upon your tax rate, this could be a substantial savings.
Okay, I know that others have already kind of shared some good information on this thread, but there needs to be a distinct realization of what the actual benefits might be, as well as the differences between an HSA and an FSA. In addition, what benefits might there be in purchasing diapers and claiming them through these accounts.
According to the IRS...
HEALTH SAVINGS ACCOUNTS
Publication 969 states...
Health Savings Accounts (HSAs)
A Health Savings Account (HSA) is a tax-exempt trust or custodial account you set up with a qualified HSA trustee to pay or reimburse certain medical expenses you incur. You must be an eligible individual to qualify for an HSA.
No permission or authorization from the IRS is necessary to establish an HSA. You set up an HSA with a trustee. A qualified HSA trustee can be a bank, an insurance company, or anyone already approved by the IRS to be a trustee of individual retirement arrangements (IRAs) or Archer MSAs. The HSA can be established through a trustee that is different from your health plan provider.
What are the benefits of an HSA? You may enjoy several benefits from having an HSA.
You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you don’t itemize your deductions on Schedule A (Form 1040).
- Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income.
- The contributions remain in your account until you use them.
- The interest or other earnings on the assets in the account are tax free.
- Distributions may be tax free if you pay qualified medical expenses.
A Health Savings Account (HSA) is a tax-exempt trust or custodial account you set up with a qualified HSA trustee to pay or reimburse certain medical expenses you incur. You must be an eligible individual to qualify for an HSA.
No permission or authorization from the IRS is necessary to establish an HSA. You set up an HSA with a trustee. A qualified HSA trustee can be a bank, an insurance company, or anyone already approved by the IRS to be a trustee of individual retirement arrangements (IRAs) or Archer MSAs. The HSA can be established through a trustee that is different from your health plan provider.
What are the benefits of an HSA? You may enjoy several benefits from having an HSA.
You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you don’t itemize your deductions on Schedule A (Form 1040).
- Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income.
- The contributions remain in your account until you use them.
- The interest or other earnings on the assets in the account are tax free.
- Distributions may be tax free if you pay qualified medical expenses.
Soooo... if you are looking to use your HSA to save money because of a tax-free benefit associated with the HSA, you can only receive this benefit if it is a "qualified medical expense".
The IRS publication on what is a "qualified medical expense" is pretty clear. In IRS publication 502 (which outlines what qualified medical expenses are) it states:
"You can't include in medical expenses the amount you pay for diaper or diaper services, unless they are needed to relieve the effects of a particular disease."
Hence, unless you are diagnosed as incontinent and have a Rx from a doctor, there is no benefit from claiming diapers on your HSA as legally there is no tax-exemption allowed on diapers without being needed to relieve the effects of a particular disease. While it might be beneficial to have a savings account where you are budgeting for the expense, there is no savings associated with it, period. If you are receiving this benefit because the trustee running your HSA account doesn't require a Rx, well, if you are ever audited by the IRS you would likely have to repay the tax savings you received.
FLEXIBLE SPENDING ARRANGEMENTS (FSAs)
FSAs are typically more restrictive than HSAs. According to IRS publication 969...
"Flexible Spending Arrangements (FSAs)
A health Flexible Spending Arrangement (FSA) allows employees to be reimbursed for medical expenses. FSAs are usually funded through voluntary salary reduction agreements with your employer. No employment or federal income taxes are deducted from your contribution. The employer may also contribute.
What are the benefits of an FSA? You may enjoy several benefits from having an FSA.
- Contributions made by your employer can be excluded from your gross income.
- No employment or federal income taxes are deducted from the contributions.
- Withdrawals may be tax free if you pay qualified medical expenses.
- You can withdraw funds from the account to pay qualified medical expenses even if you haven’t yet placed the funds in the account.
Distributions From an FSA
Generally, distributions from a health FSA must be paid only to reimburse you for qualified medical expenses you incurred during the period of coverage. You must be able to receive the maximum amount of reimbursement (the amount you have elected to contribute for the year) at any time during the coverage period, regardless of the amount you have actually contributed. The maximum amount you can receive tax free is the total amount you elected to contribute to the health FSA for the year.
You must provide the health FSA with a written statement from an independent third party stating that the medical expense has been incurred and the amount of the expense. You must also provide a written statement that the expense hasn’t been paid or reimbursed under any other health plan coverage. The FSA can’t make advance reimbursements of future or projected expenses. "
A health Flexible Spending Arrangement (FSA) allows employees to be reimbursed for medical expenses. FSAs are usually funded through voluntary salary reduction agreements with your employer. No employment or federal income taxes are deducted from your contribution. The employer may also contribute.
What are the benefits of an FSA? You may enjoy several benefits from having an FSA.
- Contributions made by your employer can be excluded from your gross income.
- No employment or federal income taxes are deducted from the contributions.
- Withdrawals may be tax free if you pay qualified medical expenses.
- You can withdraw funds from the account to pay qualified medical expenses even if you haven’t yet placed the funds in the account.
Distributions From an FSA
Generally, distributions from a health FSA must be paid only to reimburse you for qualified medical expenses you incurred during the period of coverage. You must be able to receive the maximum amount of reimbursement (the amount you have elected to contribute for the year) at any time during the coverage period, regardless of the amount you have actually contributed. The maximum amount you can receive tax free is the total amount you elected to contribute to the health FSA for the year.
You must provide the health FSA with a written statement from an independent third party stating that the medical expense has been incurred and the amount of the expense. You must also provide a written statement that the expense hasn’t been paid or reimbursed under any other health plan coverage. The FSA can’t make advance reimbursements of future or projected expenses. "
Hence, the restrictions are a bit greater, in that you will not be reimbursed for the expense unless it is for a "qualified medical expense", which again according to IRS publication 502 states that, "You can't include in medical expenses the amount you pay for diaper or diaper services, unless they are needed to relieve the effects of a particular disease."
--So, with an FSA you won't even be reimbursed for the diaper costs period unless you can demonstrate it was due to incontinence associated with a particular disease or need.
I hope this may resolve the OPs original question.
The bottom line...
YOU CANNOT LEGALLY RECEIVE AN IRS TAX BENEFIT OR SAVINGS ON PURCHASES OF DIAPERS UNLESS YOU HAVE DOCUMENTATION FROM A DOCTOR THAT IT IS REQUIRED TO RELIEVE THE EFFECTS OF A PARTICULAR DISEASE
(in layman's terms... a doctor gives you a Rx or written diagnosis of being incontinent).
The only benefit you might have if you are not incontinent, is that if you have an HSA, it might be convenient for budgeting to pay for these through this savings account as it is typically automatically taken out of your paycheck. But there is no savings, just extra paperwork. And with a FSA, you are not even able to claim diapers as an expense and be reimbursed unless you are incontinent.
For more information on the subject, please check out the IRS websites:
https://www.irs.gov/publications/p969/ar02.html#en_US_2016_publink1000204174
https://www.irs.gov/pub/irs-pdf/p502.pdf
I know this may seem like overkill, but I wanted to provide the actual policy and directives so that there was no confusion as to whether this was opinion, interpretation, or actual rules to this.
:detective3 TeddyBearCowboy
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This comes up regularly. The government will permit HSA, FSA, and medical deductions for any diapers for which there is a medical need (incontinence). A prescription makes you golden, but it's not required as far as the government is concerned (some plans may wish documentation). Diapers for infants and obviously ones purely for sexual reasons aren't going to be covered.
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