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How Eligible Medical Expenses Work with Taxes

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Any medical expense that has been reimbursed by funds from a medical spending account (HSA, FSA, HRA) cannot be taken as a deduction on your federal income tax. This page includes brief descriptions of each type of medical savings account as they relate to tax deductions.

HSA

Owners of an HSA receive three tax benefits that affect the money in their account:

  • Reduce taxable income - HSA contributions through payroll are made pre-tax, which lowers tax liability on paychecks. Manual contributions are tax deductible when filing taxes each year.
  • Tax-free earnings - Interest growth earned on HSA funds is never taxed.
  • Tax-free distributions - HSA funds are not taxed when used for eligible expenses. 

Because no taxes are paid on the money in the account, medical expenses paid for with funds from an HSA cannot be taken as a deduction on your taxes.

HSA contributions can also be made post-tax as well.  Post-tax contributions to your HSA are eligible to be taken a a deduction.

For more information, see HSAs and Your Taxes.

HRA

Your employer contributes the funds to your HRA account.  This money is not considered part of your income, so you don't pay taxes on the money in the account.  Because you don't pay the taxes on funds in your HRA account, medical expenses paid for with those funds cannot be taken as a deduction on your taxes.

FSA

Funds are contributed to an FSA before taxes are applied, and FSA funds are not taxed when used to pay for eligible expenses.  Because no taxes have been paid on the funds, medical expenses paid for with funds from a FSA account cannot be taken as a deduction on your taxes.

 

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