Health Savings Accounts (HSAs) can be invaluable tax savings vehicles for those unforeseen medical “life” events. (Or even for those foreseen medical “life” events!) However, with a maze-like Internal Revenue Service (IRS) code, how do you use an HSA legally? Do things become even more complicated when you have a long distance between you and the medical facility or medical provider you want to use for help? Fortunately, the situation is not that complicated when using HSAs for travel expenses. Don’t believe me? Read on for the key details!
Important Terminology & Resources
There are three key terms when considering using HSAs for travel expenses–necessary, reasonable, and qualified. Necessary speaks to medical expenses that are required to maintain or improve one’s health in regard to a health concern. Reasonable speaks to medical expenses that are not more than what’s needed to handle the medical issue. Qualified means that an expense is approved by the IRS for tax-saving purposes.
Two IRS publications cover the concepts of these terms. Publication 502 covers medical expenses as they pertain to taxes while Publication 969 discusses HSAs among other medical savings vehicles. Together, they show what medical expenses an HSA can support. There are a lot of these expenses, and travel is a special category with stipulations.
HSAs For Travel Expenses
There are a lot of tips for travel for medical reasons, but one of the most important is proper use of an HSA if you have one available. The primary uses are transportation and lodging.
For transportation, you can utilize funds for airline tickets, parking, car rentals, tolls, taxis, and other related transportation methods. If bringing a companion, you can also pay for the transportation of that individual. And if you’re using your own vehicle, you can use a medical mileage rate of $0.17/mile as of 2018. (Note that Publication 502 states $0.17/mile but a late 2017 IRS news release informs readers that there is an increase for 2018.) Alternately, paying for gas instead of taking the medical mileage rate is an option.
For lodging, a simple $50 per person per night qualifies as an HSA travel expense. That means that if you bring a companion, the HSA can pay for a $100 hotel room. Do not consider a resort or extravagant hotel. When I used my HSA for this kind of need, I selected the least expensive hotel in the area (while considering proximity, convenience, and other necessary factors). Remember, if the hotel room costs less than the HSA-qualifying amount, only expense the lesser of the hotel room cost and the IRS qualification level.
Meals are a final consideration. Unfortunately, the only meals that qualify as an HSA travel expense are for the patient while in the hospital. That’s limiting, but every bit can help.
Three special considerations are of final note. First, do not consider using an HSA for trips prescribed for mental well-being as those do not qualify under IRS code. Second, if you travel to another city for medical treatment or surgery, be sure that you have an excellent reason. Reasons may include no available treatment in your current city or seeking out a superior surgeon to provide a better chance of a positive outcome. Purely personal reasons will not be acceptable under the IRS code. When in doubt, refer back to our three magic words–necessary, reasonable, and qualified! Third, try to pay for expenses with a rewards credit card; then withdraw the equivalent amount from your HSA to your bank account. This method will allow you to take advantage of your HSA while earning a degree of return on your expenses.
The use of HSAs for travel expenses is a very special category of tax savings. Hopefully, you have very few needs for this benefit. However, if you do, the IRS supports you with some great guidelines to assist with the monetary aspect of treatment. Honestly, this subset of tips for medical travel is one of the most important batch of tips I can provide.
I hope you’ve found this information useful. Do you have any additional tips? I would love to hear them; share them below!
Until next time, toodles!
Note: Please check directly with the IRS or with your tax advisor for any questions specific to your medical travel needs and HSA situation.