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Understanding IRS Code 213[d]
[By Staff Reporters]
There have been thousands of legal cases involving the many nuances of what constitutes “medical care” for purposes of section 213(d) of the Internal Revenue Code. A determination of whether an expense is for “medical care” is based on all the relevant facts and circumstances. To be an expense for medical care, the expense has to be primarily for the prevention or alleviation of a physical or mental defect or illness. The determination often hangs on the word “primarily”.
Allowable Expenditures
| Acupuncture | Alcoholism Treatment |
| Ambulance | Artificial Limb |
| Artificial Teeth | Bandages |
| Birth Control Pills (prescription) | Breast Reconstruction Surgery (mastectomy) |
| Car Special Hand Controls (disability) | Certain Capital Expenses (disabled) |
| Chiropractors | Christian Science Practitioners |
| COBRA premiums | Contact Lenses |
| Cosmetic Surgery (due to trauma or disease) | Crutches |
| Dental Treatment | Dermatologist |
| Diagnostic Devices | Disabled Dependent Care Expenses |
| Drug Addiction Treatment (inpatient) | Drugs (prescription) |
| Eyeglasses | Fertility Enhancement |
| Guide Dog | Gynecologist |
| Health Institute (if prescribed by physician) | H.M.O. (certain expenses) |
| Hearing Aids | Home Care |
| Hospital Services | Laboratory Fees |
| Lasik Surgery | Lead-Based Paint Removal |
| Learning Disability Fees (prescription) | Legal Fees (if for mental illness) |
| Life-Care Fees | Lodging (for out-patient treatment) |
| Long-Term Care (medical expenses) | Long-Term Care Insurance (up to allowable limits) |
| Meals (associated with receiving treatments) | Medical Conferences (for ill spouse/dependent) |
| Medicare Premiums | Medicare Deductibles |
| Nursing Care | Mentally Retarded (specialized homes) |
| Obstetrician | Nursing Homes |
| Operations – Surgical | Operating Room Costs |
| Optician | Ophthalmologist |
| Organ Transplant (including donor’s expenses) | Optometrist |
| Orthopedic Shoes | Orthodonture |
| Osteopath | Orthopedist |
| Over-the-Counter Medicines | Out-of-pocket expenses while enrolled in Medicare |
| Pediatrician | Oxygen and Equipment |
| Podiatrist | Personal Care Services (for chronically ill) |
| Prenatal Care | Post-Nasal Treatments |
| Prosthesis | Prescription Medicines |
| Psychiatric Care | PSA Test |
| Psychoanalysis | Psychiatrist |
| Psychologist | Psychoanalyst |
| Radium Treatment | Qualified Long-Term Care Services |
| Special Education for Children (ill or disabled) | Smoking Cessation Programs |
| Spinal Tests | Specialists |
| Sterilization | Splints |
| Telephones and Television for the Hearing | Surgeon |
| Therapy | Impaired |
| Treatment | Transportation Expenses for Health Care |
| Vitamins (if prescribed) | Vaccines |
| Wheelchair | Weight Loss Programs |
| X-Rays | Wig (hair loss from disease) |
Non-Allowable Expenditures
| Advance Payment for Future Medical Expenses | Athletic Club Membership |
| Automobile Insurance Premium | Babysitting (for healthy children) |
| Boarding School Fees | Bottled Water |
| Commuting Expenses for the Disabled | Controlled Substances |
| Cosmetics and Hygiene Products | Dancing Lessons |
| Diaper Service | Domestic Help |
| Electrolysis or Hair Removal | Funeral Expenses |
| Hair Transplant | Health Programs at Resorts, Health Clubs, & Gyms |
| Household Help | Illegal Operations and Treatments |
| Illegally Procured Drugs | Maternity Clothes |
| Medigap premiums | Nutritional Supplements |
| Premiums for Life or Disability Insurance | Premiums for Accident Insurance |
| Premiums for your HSA-qualified health plan | Scientology Counseling |
| Social Activities | Special Feeds/Beverages |
| Swimming Lessons | Teeth Whitening |
| Travel for General Health Improvement | Tuition in a Particular School for Problem Children |
Conclusion
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OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:
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- FINANCE: Financial Planning for Physicians and Advisors
- INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors
- Dictionary of Health Economics and Finance
- Dictionary of Health Information Technology and Security
- Dictionary of Health Insurance and Managed Care
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Filed under: Accounting, Health Insurance, Taxation | Tagged: Healthcare Savings Account, HSA, Internal Revenue Code 213[d] |
The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants 
Health Reform HSA Update
While the passage of HR 3590 will have little impact on Health Savings Accounts (HSAs there are two changes to be aware of:
• Effective January 1, 2011, tax free HSA dollars may no longer be used to purchase over-the-counter drugs not prescribed by a doctor.
• Effective January 1, 2011, the tax on HSA distributions that are not used for qualified medical expenses will increase to 20% from 10%.
As far as we can determine, there are no other issues that will impact on HSAs at this time. We will keep you inform should this change.
Source: Dorothy McGinty
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More on HSAs
An HSA can only be used in conjunction with a High Deductible Health Plan.
In 2010, the minimum deductible for a HDHP is $1200 for an individual and $2400 for a family. See these IRS websites for details:
Click to access p969.pdf
Click to access rp-09-29.pdf
Brian J. Knabe MD CMP™
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HSA Money
HSA money is tax-free as long as it is used to pay for qualified medical expenses. If you use the money for any other reason, you will be required to pay income tax and a 10% tax penalty on that amount (you will not pay a penalty if you are disabled or age 65 or older).
Qualified medical expenses are services that are typically covered by a health care plan, such as office visits, hospitalization, prescription drugs, and vision expenses.
For a complete list of IRS-allowable health care expenses, refer to IRS Publication 502 “Medical and Dental Expenses” available at http://www.irs.gov under “Forms and Publications.”
Hope R. Hetico RN, MHA
[Managing Editor]
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Top 25 HSA Issues for 2013 What You Need to Know
If your institution offers HSAs, you already know they are among the most regulated account types available to your customers.
Video Update: http://healthsprocket.com/hs/node/7989
Keeping your HSA offerings in compliance with IRS regulations is an ongoing challenge, and there are changes every year.
Hope R. Hetico RN MHA
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Health Savings Accounts Growing, Especially Among the Better Paid
The number of people with health savings accounts has ballooned, but higher-income families are much more likely to fund the accounts, a new analysis found. The number of health savings accounts, or HSAs, has been growing by about one million a year, reaching more than 6.5 million in 2012, according to research published this week in the journal Health Affairs. The analysis covered eight years, although the accounts have been around for more than a decade.
Health savings accounts let consumers save and pay for medical care, free of federal income taxes. Balances are carried from year to year, and consumers can often invest the money for tax-free growth. The accounts are not available to everyone, however. They must be used with a specific type of health insurance plan with a high deductible (at least $1,300 for a single person in 2015).
Source: Ann Carrns, The New York Times [9/11/15]
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HD-HCPs
Low deductible insurance is simply prepayment of services.
Pay attention not only to the one time costs, but also the annual costs. At least with high deductible there’s a chance you won’t get sick and save money.
This may be an invisible cost if your employer is paying it but its still coming from your pay.
Jimbo
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What are three things to know about HSAs in 2016?
Three things to know about HSAs in 2016
1. There were 18.2 million HSAs as of June 30, up 25% from a year earlier, according to HSA consultancy Devenir.
2. HSA assets hit $34.7 billion at the end of June, 22% higher than the previous year, Devenir found.
3. In the first six months of 2016, $16.7 billion went into HSAs, and holders withdrew $11.8 billion, according to Devenir.
Source: CNBC
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Qualified medical expenses
Because health accounts were created by the tax code, it’s the Internal Revenue Service that determines what expenses can be reimbursed and what cannot.
But, these may be getting slimmed down or changed in 2017. For example, my plan from Optum Health Financials lists the following examples of qualified and nonqualified medical expenses.
Examples of qualified expenses
•Acupuncture
•Alcohol and drug addiction treatment
•Breast reconstruction surgery
•Dental treatment
•Diagnostic tests and devices
•Doctor’s visits
•Prescriptions
•Eyeglasses, contact lenses and exams
•Fertility enhancements
•Hearing aids and batteries
•Operations/surgery (non-cosmetic)
•Nursing services
•Physical therapy
•Psychiatric care
•Smoking cessation
NOTE: View IRS publication 502 for a full list
Examples of nonqualified expenses
If you use your HSA to pay for nonqualified expenses, you’ll have to pay income taxes on those funds. You will also be assessed a 20% penalty:
•Cosmetic surgery
•Diaper service
•Electrolysis or hair removal
•Funeral expenses
•Health club dues
•Illegal operations and treatments
•Maternity clothes
•Nutritional supplements
•Over-the-counter medicines for which you do not have a doctor’s prescription
•Toiletries (e.g. toothbrush, toothpaste)
•Teeth whitening
•Weight loss programs (unless prescribed to treat a specific disease)
Hiram
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More on HSAs as “back-door” IRA
IRS Publication 969:
Click to access p969.pdf
Chester
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CORONA VIRUS AND HSA COVERAGE
https://www.irs.gov/newsroom/irs-high-deductible-health-plans-can-cover-coronavirus-costs
Jeroma
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