The Internal Revenue Service (IRS) released guidance reminding taxpayers and health spending account plan administrators that personal expenses for general good health and wellness do not qualify as medical expenses under tax law.
This reminder underscores that personal, general good health expenses may not be reimbursed under health flexible spending accounts (FSAs), health savings accounts (HSAs), health reimbursement arrangements (HRAs), or medical savings accounts (MSAs).
The IRS emphasizes the importance of adhering to the rule that only expenses that qualify as “medical care” under section 213 of the Internal Revenue Code are eligible for reimbursement. While some companies misrepresent that food and wellness expenses can be reimbursement under health spending account plans, this is not the case.
IRS Commissioner Danny Werfel highlights that while legitimate medical expenses can be reimbursed, taxpayers must exercise caution against aggressive marketing tactics that suggest personal expenditures, such as food for weight loss, qualify for reimbursement when they do not meet the criteria for medical expenses.
Furthermore, the IRS clarifies that documentation from doctors based solely on self-reported health information does not convert non-medical expenses into medical ones. Such documentation fails to establish a connection to a targeted diagnosis-specific activity or treatment, rendering such personal expenses ineligible for reimbursement.
For instance, a diabetic seeking to manage blood sugar levels by adjusting dietary habits may encounter companies offering 'doctor's notes' for purchasing healthier foods using pre-tax dollars from an FSA. However, submitting such expenses with a 'doctor's note' would lead to denial of reimbursement, since food expenses are not considered medical. Allowing the reimbursement could jeopardize the spending account plan’s validity.
It's important to note that FSAs and other health spending plans covering non-medical expenses lose their tax qualification and any payments made under a disqualified plan (including reimbursements for actual medical expenses) would be considered taxable income.
The IRS encourages taxpayers to consult its frequently asked questions regarding medical expenses related to nutrition, wellness, and general health to determine the eligibility of food or wellness expenses as medical expenses. A copy of the FAQs may be accessed by clicking here.
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