HSA OTC mileage deduction

Your question "does it follow that..." implies a certain logical consistency that as many here will tell you, does not exist in the U.S. income tax system.

It doesn't sound entirely unreasonable to me, but see also the standard disclaimer at the end of this message. ;-)

You might also have to take into account whether the frequency of your trips is reasonable. While prescription medications have a fixed dosage rate that determines when you must go for a refill, you typically could buy many months worth of OTC medications in one trip. If you are making daily trips to the pharmacy, that might be harder to support.

-Mark Bole

Clearly, yes. As long as the expense qualifies under Section 213(d) as a medical expense (note: insurance premiums have additional restrictions), its cost may be covered from an HSA. "Mileage" (transportation) qualifies as a reimbursable expense (213(d)(1)(B)).

Text of IRC 223(d)(2):

(2) Qualified medical expenses (A) In general The term "qualified medical expenses" means, with respect to an account beneficiary, amounts paid by such beneficiary for medical care (as defined in section 213 (d) [1] for such individual, the spouse of such individual, and any dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of such individual, but only to the extent such amounts are not compensated for by insurance or otherwise. (B) Health insurance may not be purchased from account Subparagraph (A) shall not apply to any payment for insurance. (C) Exceptions Subparagraph (B) shall not apply to any expense for coverage under- (i) a health plan during any period of continuation coverage required under any Federal law, (ii) a qualified long-term care insurance contract (as defined in section

7702B (b)), (iii) a health plan during a period in which the individual is receiving unemployment compensation under any Federal or State law, or (iv) in the case of an account beneficiary who has attained the age specified in section 1811 of the Social Security Act, any health insurance other than a medicare supplemental policy (as defined in section 1882 of the Social Security Act).

Text of IRC 223(f) [edited]:

(f) Tax treatment of distributions (1) Amounts used for qualified medical expenses Any amount paid or distributed out of a health savings account which is used exclusively to pay qualified medical expenses of any account beneficiary shall not be includible in gross income. ... (6) Coordination with medical expense deduction For purposes of determining the amount of the deduction under section 213, any payment or distribution out of a health savings account for qualified medical expenses shall not be treated as an expense paid for medical care.

------------- So, one cannot deduct (for federal purposes*) any expense paid for or reimbursed from an HSA as a medical expense on Schedule A.

• - Some states, like California, don't recognize HSAs, so a deduction as a medical expense for items paid from an HSA is allowed for state income tax purposes.