HSA, FSA and HRA Reimbursement Rules for General Wellness Expenses

Health savings accounts (HSAs), health flexible spending arrangements (FSAs), and health reimbursement arrangements (HRAs) provide valuable tax advantages for paying eligible healthcare expenses. However, not every product or service that promotes health qualifies for tax-free reimbursement.

As the market for fitness trackers, wearable technology, nutritional supplements, and wellness programs continues to grow, employers and employees may have questions about which expenses qualify. The IRS recently addressed one of these questions by issuing new guidance on when wearable health-monitoring devices may be considered eligible medical expenses.

What Qualifies as a Medical Expense?

Under Section 213(d) of the Internal Revenue Code, medical expenses generally include costs incurred for the diagnosis, cure, mitigation, treatment, or prevention of disease, as well as expenses for treatments affecting a structure or function of the body.

Common qualifying expenses include doctor visits, diagnostic testing, prescription medications, dental and vision care, and certain medical equipment and supplies. Eligible expenses may generally be paid or reimbursed through an HSA, health FSA, or HRA, subject to the applicable account and plan rules.

However, the IRS distinguishes between expenses incurred for medical care and those intended primarily to improve general health or wellness. A product or service does not automatically qualify as a medical expense simply because it promotes a healthier lifestyle or is recommended by a healthcare professional.

For example, the IRS has previously explained that:

• Gym memberships generally do not qualify unless they meet specific requirements related to treating a diagnosed disease or prescribed physical therapy.
• Nutritional counseling may qualify when provided to treat a specific disease, such as diabetes or obesity, but not when intended solely to improve eating habits.
• Weight-loss programs may qualify when undertaken to treat a diagnosed medical condition, but not simply to improve appearance or general fitness.
• Nutritional supplements generally do not qualify unless recommended by a medical practitioner to treat a specific diagnosed medical condition.

The determining factor is generally the medical purpose of the expense, rather than whether the product or service provides a health-related benefit.

New IRS Guidance Addresses Wearable Health Devices

On September 23, 2026, the IRS added Question and Answer 15 to its frequently asked questions addressing medical expenses related to nutrition, wellness, and general health.

The new guidance specifically addresses wearable devices, including smartwatches, fitness bands, rings, patches, sensors, and similar technology that tracks bodily functions or other health-related information.

These devices may monitor heart rate, blood pressure, blood glucose, sleep patterns, physical activity, and other health indicators. Although this information can be useful, the IRS makes clear that the ability to track health-related data does not, by itself, make the device an eligible medical expense.

Instead, eligibility depends on the circumstances surrounding the purchase and use of the device.

A wearable device that serves both medical and nonmedical purposes may qualify if it is purchased and used primarily to assist in diagnosing, treating, managing, or preventing a specific disease.

For example, an individual who purchases a smartwatch simply to track daily steps, monitor sleep, and improve fitness generally would not have a qualifying medical expense. However, a wearable device purchased and used primarily to monitor a specific medical condition may qualify, depending on the circumstances.

What Factors Determine Eligibility?

According to the IRS, several factors may help establish whether a wearable device was purchased and used primarily for a qualifying medical purpose:

• Whether a medical practitioner recommended the device.
• Whether the individual has a specific diagnosis, symptoms, abnormal test results, or identifiable risk factors.
• Whether the information collected by the device relates directly to the medical condition being evaluated or managed.
• How the information is reviewed and used in connection with the individual’s medical care.

Importantly, a recommendation from a healthcare professional is only one factor. A general desire to monitor or improve health is not sufficient to establish that a device qualifies for reimbursement.

The IRS also clarified that accessories, additional features, and software subscriptions associated with wearable devices qualify as medical expenses only when they are purchased primarily to serve the same qualifying medical purpose.

What Does This Mean for Employers and Plan Administrators?

The new guidance reinforces the importance of distinguishing between general wellness purchases and expenses incurred for specific medical purposes.

For health FSAs and HRAs, employers and their administrators should continue to require appropriate documentation to substantiate claims, particularly when a product has both medical and personal uses. Depending on the circumstances, documentation may need to establish the medical condition, the purpose of the device, and its relationship to the individual’s treatment or disease management.

For HSAs, account holders are generally responsible for determining whether distributions are used for qualified medical expenses and maintaining appropriate supporting records.

Employers should also remind employees that a product advertised as HSA- or FSA-eligible is not necessarily reimbursable in every situation. Eligibility may depend on the individual’s particular medical circumstances and the terms of the applicable plan.

The Bottom Line

The IRS’ latest guidance does not make smartwatches, fitness trackers, and other wearable devices universally eligible for reimbursement. Instead, it confirms that these products may qualify when purchased and used primarily for a specific medical purpose, rather than general health monitoring.

As technology continues to blur the distinction between medical care and everyday wellness, employers and employees should evaluate expenses carefully and maintain appropriate documentation before seeking tax-free reimbursement.