Qualified Medical Expenses explained

A super important concept to understand when it comes to Health Savings Accounts (HSAs) is the Qualified Medical Expense (QME). There are expenses that are designated by the IRS and include medical, dental, vision and prescription expenses. They also include things that you buy at pharmacies, such as sunscreen (greater than SPF 15), pregnancy tests and first aid kits. Some things like OTC allergy medicine and cough syrup qualify if you have a prescription. Lastly, if your doctor gives you a letter for massage therapy, yoga or even dancing lessons, then these expenses are QMEs. Click if you want the nitty gritty details.

The hard part is keeping track of everything because you need to prove to the IRS that an expense was a QME if you get audited. Now, the risk of being audited is super low generally but you want to be prepared if the IRS ever comes knocking.

Therefore, you need to keep all of your pharmacy receipts to prove you bought sunscreen and not chocolate. You need to follow up with your doctor to get prescriptions for the over the counter (OTC) meds that you buy, and you need to get letters from your doctor when they direct you to get a massage. I will say that it’s not too difficult. I followed up with my PCP to get a letter for yoga classes and it was pretty easy.

The first step I took is turning on digital receipts with CVS and Wallgreens (you have to use your loyalty card for it to work). I went on their apps and enabled digital receipts (for CVS app go to… account -> digital receipt preferences -> toggle on). Below is the screenshot from CVS app showing what I did.

Enabling digital receipts means that the merchant will email you a receipt, so you know exactly what you bought (see below). All of the big pharmacy chains (CVS, Wallgreens, RiteAid, etc.) and the big retailers with pharmacies (Target, Walmart, etc.) will send you digital receipts if you are part of their loyalty programs and you turn on the feature.

Keeping track of this stuff is a bunch of work but its worth it. I use google sheets to keep a list of my QMEs and I embed links to my receipts that are saved on google drive. Contact us if you want more details on QMEs and pro tips on hacking the system.