OTC Medications Not Tax Deductible under HSA « Health Insurance Advisory

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new healthcare reform lawThe new healthcare law, called the Patient Protection and Affordable Care Act (PPACA), represents comprehensive healthcare reform legislation signed into law on March 23, 2010. It contains numerous provisions designed to protect consumers and promote low cost medical insurance, including many new taxes to pay for the cost.

In this section of the site, you can also obtain the following information specific to your state: available medical insurance options, efforts to regulate medical insurance premiums, healthcare, the individual medical insurance marketplace and the new healthcare law.

Our objective is to help Americans make sense of the new healthcare law by explaining key provisions in plain English and assisting individuals, families and the self-employed in using this information to find and secure affordable medical insurance.

OTC Medications Not Tax Deductible under HSA

The cost of over-the-counter drugs and medicines can no longer be reimbursed or paid for under a Health Savings Account (HSA), unless a prescription is obtained. This change, effective January 1, 2011, is part of the many sweeping reforms of the new healthcare law, called the Patient Protection and Affordable Care Act.

Currently, over-the-counter medicines and prescriptions, such as aspirin, ointments, cold sore remedies, sleep aids, cough syrup, allergy medicine and bandages, can be paid for or reimbursed with HSA monies without a prescription. If these items are purchased in 2011, then they must be obtained with a physician’s prescription in order to be considered an eligible expense. Note: if these items were purchased in 2010, then they can be reimbursed in 2011 without a prescription.

The following out-of-pocket healthcare expenses are still considered eligible under an HSA in 2011 if purchased without a prescription:

  • Insulin
  • Medical devices
  • Eye glasses
  • Contact lenses

An HSA is a special tax favored savings account that is paired with a high-deductible medical insurance plan. The HSA can be established at virtually any bank or financial institution. It’s designed to help individuals save money on healthcare by allowing qualified out-of-pocket health care expenses to be paid for with pre-tax monies. This is accomplished by deducting the monies deposited into your HSA on your tax return (IRS Form 1040) up to the limit specified by the federal government. You can use your HSA monies to pay for qualified out-of-pocket healthcare expenses at the point of sale (most HSA accounts come with a checkbook and Debit card) or you can withdraw your HSA monies to reimburse yourself for the expense. Since you are the accountholder/ owner any unused monies grow and accumulate for future use. HSA monies can also be invested and used for retirement!

The penalty for non-qualified distributions increases from 10% to 20%. This is intended to discourage HSA accountholders from using their contributions to pay for non-qualified out-of-pocket healthcare expenses.

To learn more about how an HSA can help you save money, visit our medical insurance medical insurance research center. For a complete list of the qualified out-of-pocket healthcare expenses that are currently deductible (as of the date of this article) under and HSA, please see IRS Publication 502.

If you are self employed and searching for affordable self employed medical insurance or individual dental insurance, let us help you. Our online medical insurance quotes make it easy to shop, compare and apply online for a variety of the health insurance plans, such as critical illness protection, medical insurance overseas and affordable temporary health insurance. Save money and get covered today!

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