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I'm trying to understand which transportation-related medical expenses are IRS-Qualified Medical Expenses for health savings accounts (HSA).

I understand that Publication 969 defines what HSAs are, including what counts as qualified medical expenses for HSAs:

Qualified medical expenses are those expenses that generally would qualify for the medical and dental expenses deduction. These are explained in Pub. 502, Medical and Dental Expenses. [+ adding some exceptions to it specific to HSA].

Publication 502 indicates:

You can include in medical expenses amounts paid for transportation primarily for, and essential to, medical care.

Does the IRS gives any guidance regarding what defines a transportation-related medical expense to be primarily for, and essential to, medical care?

For example, does the primarily mean I should stay more than X% of the time in a medical facility? Does the essential mean I couldn't find a similar treatment closer to my place? etc.

Franck Dernoncourt
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1 Answers1

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In the absence of a statutory definition, the standard is 'reasonableness.'

First, an important disclaimer: I AM NOT A LAWYER, THIS IS NOT LEGAL ADVICE. This is the sort of thing a Tax Attorney is for. That said, I am a policy scholar so:

26 U.S. Code ยง 223 defines HSAs and does not offer a definition for either 'primarily' or 'essential' and so the plain English meaning of those words holds.

To wit:

Primarily has two available definitions, and to be safe you should ensure both apply.

The first is "for the most part." This could be read as requiring merely a plurality to be satisfied, but the safest reading is to require that 51% of a given trip's purpose satisfies the condition ("for the purpose of medical care"). 51% of what? 51% of the cost of the trip. So if you stop at a grocer on the way to the hospital (or on the way home from the hospital) but doing so doesn't at least double the cost of the trip? You're fine.

The second is, "in the first place," which would suggest that so long as your trip began under the first condition, no matter what happens or however much cost you incur for whatever reason once the trip has commenced it's eligible to be paid from the HSA. The emphasis is key here: whatever happened that caused the trip to end up about something other than medical care must have been unforeseeable until after you began the journey. This could, for example, cover a $20 taxi fare to the hospital turning into $60 when you realize you forgot your wallet at home - $40 (66%) of the trip is now about that, but the trip itself began as 100% getting you to the hospital for medical care, so it's probably still okay to pay that fare from your HSA.

Essential is relevantly defined as 'necessary, indispensable, or unavoidable.'

So yes, essential means there wasn't a cheaper transportation option to the medical care you received, possibly including similar treatment closer to home. The transportation cost itself must have been a necessary precondition for you to receive the medical care in question - this is almost certainly the case.

In both instances, the 'reasonableness' standard means no taking stretched limos to the hospital; no private jet charters when a coach ticket will suffice; no going on a road trip that just happens to end at a hospital and paying the whole $4,000 of hotel and gas from the HSA, etc.

Honestly, if you try to engineer a 51%-for-medical-reasons trip, you're likely to fail a reasonableness test because it's obvious you're working as hard as you can to abuse the system.

TL;DR - Make a genuine good faith effort to not abuse this, and you'll almost certainly be okay.

William Walker III
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