Amid concerns about people being misled, the Internal Revenue Service is reminding taxpayers and health spending plan administrators that personal expenses for general health and wellness are not considered medical expenses under the tax law.
This means personal expenses are not deductible or reimbursable under health flexible spending arrangements, health savings accounts, health reimbursement arrangements, or medical savings accounts (FSAs, HSAs, HRAs, and MSAs).
This reminder is important because some companies are misrepresenting the circumstances under which food and wellness expenses can be paid or reimbursed under FSAs and other health spending plans.
“Legitimate medical expenses have an important place in the tax law that allows for reimbursements,” said IRS Commissioner Danny Werfel. “But taxpayers should be careful to follow the rules amid some aggressive marketing that suggests personal expenditures on things like food for weight loss qualify for reimbursement when they don’t qualify as medical expenses.”
Some companies mistakenly claim that notes from doctors based merely on self-reported health information can convert non-medical food, wellness, and exercise expenses into medical expenses, but this documentation actually doesn’t. Such a note would not establish that an otherwise personal expense satisfies the requirement that it be related to a targeted diagnosis-specific activity or treatment; these types of personal expenses do not qualify as medical expenses.
For example: A diabetic, in his attempts to control his blood sugar, decides to eat foods that are lower in carbohydrates. He sees an advertisement from a company stating that he can use pre-tax dollars from his FSA to purchase healthy food if he contacts that company. He contacts the company, who tells him that for a fee, the company will provide him with a ‘doctor’s note’ that he can submit to his FSA to be reimbursed for the cost of food purchased in his attempt to eat healthier. However, when he submits the expense with the ‘doctor’s note’, the claim is denied because food is not a medical expense and plan administrators are wary of claims that could invalidate their plans.
FSAs and other health spending plans that pay for, or reimburse, non-medical expenses are not qualified plans. If the plan is not qualified, all payments made to taxpayers under the plan, even reimbursements for actual medical expenses, are includible in income.
The IRS encourages taxpayers with questions to review the frequently asked questions on medical expenses related to nutrition, wellness and general health to determine whether a food or wellness expense is a medical expense.
IRS.gov provides more information regarding details and requirements for deductibility of medical expenses; taxpayers can also review Can I deduct my medical and dental expenses? and Publication 502, Medical and Dental Expenses.