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Eligibility4 min read
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Common Eligibility Mistakes to Avoid

Assuming every online listing is eligible can lead to reimbursement headaches. Here is what to watch for.

Nothing is more frustrating than purchasing a product you thought was HSA/FSA eligible, only to have your reimbursement denied. Unfortunately, this happens more often than you'd think. Let's look at the most common mistakes and how to avoid them.

Mistake #1: Trusting Every "HSA Eligible" Label

Just because a product is marketed as "HSA eligible" doesn't guarantee your specific plan will cover it. Eligibility can vary based on your plan administrator's interpretation of IRS guidelines.

Always verify with your plan administrator before making large purchases. Keep all receipts and product descriptions.

Mistake #2: Forgetting Documentation

The IRS requires substantiation for all HSA/FSA expenses. This means you need to keep detailed records including receipts, prescriptions (if required), and proof of medical necessity.

  • Itemized receipts showing date, vendor, and item description
  • Prescription or letter of medical necessity (for certain items)
  • Explanation of Benefits (EOB) from your insurance
  • Credit card statements as backup (but not as primary proof)

Mistake #3: Missing Prescription Requirements

Many items that seem like obvious medical expenses actually require a prescription or Letter of Medical Necessity (LMN) to be eligible. This includes items like massage guns, weighted blankets, and certain supplements.

Items requiring a prescription: Sunscreen, vitamins/supplements, massage devices for general wellness, exercise equipment (even if marketed as "therapeutic").

Mistake #4: Using Funds for Ineligible Expenses

Using HSA/FSA funds for non-qualified expenses triggers taxes and penalties. For HSAs, you'll owe income tax plus a 20% penalty if you're under 65. For FSAs, the purchase simply won't be reimbursed.

  • General fitness equipment (treadmills, weights) without a prescription
  • Cosmetic procedures and products
  • Toiletries and personal care items
  • Gym memberships (with very rare exceptions)
  • Teeth whitening products

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Frequently Asked Questions

Why was my HSA/FSA reimbursement denied?
Common reasons include: the item isn't actually eligible under IRS rules, missing documentation or receipts, the item requires a prescription or Letter of Medical Necessity that wasn't provided, or the expense was incurred before your account was active.
Do I need a prescription for OTC medications to be FSA eligible?
No, not anymore. Since the CARES Act of 2020, over-the-counter medications like pain relievers, allergy medicine, and cold medicine are eligible without a prescription. However, items like sunscreen and vitamins may still require a prescription for eligibility.
What documentation do I need for HSA/FSA purchases?
Keep itemized receipts showing the date, vendor, item description, and amount. For items requiring medical necessity, you'll also need a prescription or Letter of Medical Necessity from your doctor.
What happens if I use HSA funds for non-eligible expenses?
If you're under 65, you'll owe income tax on the amount plus a 20% penalty. After 65, you'll only owe income tax (no penalty). For FSAs, non-eligible purchases simply won't be reimbursed.

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