Can You Use HSA for Prescriptions? OTC Rules and Records

Yes, you can use an HSA for prescriptions. Any medicine your doctor, dentist, or other licensed provider writes a prescription for is a qualified medical expense, so you can pay for it with tax-free HSA dollars. Insulin qualifies too, even if your state lets you buy it without a prescription. And since a 2020 law change, most over-the-counter medications and menstrual care products are eligible as well, no prescription required.

What Counts as a Prescription for HSA Purposes

Federal law defines qualified medical expenses for HSAs by pointing to the medical expense deduction rules in 26 U.S.C. § 213(d).¹ Under that rule, a medicine or drug counts only if it is a “prescribed drug” or insulin.² A prescribed drug is one that requires a prescription for you to use it, so brand-name, generic, and compounded medications all qualify as long as a licensed provider wrote the script.

Insulin gets its own line in the statute. That means HSA funds cover it regardless of whether your state requires a prescription to buy it.²

Over-the-Counter Medications You Can Now Buy

Before 2020, an over-the-counter drug needed a doctor’s note to be HSA-eligible. The CARES Act removed that requirement for amounts paid after December 31, 2019.³ You can now walk into any pharmacy and use HSA funds for common products like ibuprofen, antihistamines, antacids, cold medicine, and first-aid supplies without producing a prescription.

The same law made menstrual care products qualified medical expenses. Tampons, pads, liners, cups, and sponges are all eligible.³ The category is written directly into the HSA statute.¹

Pharmacy Items That Don’t Qualify

Not everything on a pharmacy shelf is HSA-eligible. To qualify, a product generally has to treat, diagnose, or prevent a medical condition, or fit the prescribed-drug or insulin categories. Products bought for general wellness or appearance don’t clear that bar.

Vitamins and supplements taken for general health, including standard multivitamins and herbal supplements, are not qualified expenses. If a doctor recommends a specific supplement to treat a diagnosed condition, such as vitamin D for a documented deficiency, that product can qualify.⁴
Cosmetic products like anti-aging creams and teeth-whitening kits are excluded. The tax code carves out cosmetic items unless they correct a deformity from a congenital abnormality, accident, or disfiguring disease.²
Medical marijuana is not eligible. Even where state law permits it, federal law classifies marijuana as a controlled substance, and IRS Publication 502 states that you cannot include the cost of a controlled substance that violates federal law.⁴
Prescription drugs imported from other countries generally don’t qualify. There are narrow exceptions: when the FDA has specifically authorized legal importation of the drug, or when you purchase and use the drug in a foreign country and it is legal in both that country and the United States.⁴

Gray Areas and Letters of Medical Necessity

Some products serve both medical and personal purposes, and eligibility depends on whether the item treats a specific condition or is used for general well-being.

Acne cleansers, gels, and creams designed to treat acne are generally eligible because they address a skin condition. Broad-spectrum sunscreen with SPF 15 or higher qualifies as an over-the-counter health product. A basic moisturizer marketed for healthy skin would not qualify unless a doctor prescribed it for a diagnosed condition like eczema.

When eligibility is unclear, ask your provider for a letter of medical necessity. It should include your name, diagnosis, the recommended product or treatment, an explanation of why it is medically necessary, and the provider’s signature. Keep it on file in case your HSA administrator or the IRS asks.

How to Pay at the Pharmacy

Most HSA providers issue a debit card tied to your account. Swipe it at the pharmacy counter and the cost comes straight out of the HSA in pre-tax dollars.

You can also pay out of pocket and reimburse yourself later. Log into your HSA provider’s portal, enter the transaction, upload the receipt, and the money is deposited to your bank account, typically within two to five business days. This route is useful if you want to keep your HSA balance invested.

There is no deadline for requesting reimbursement. You can pay for a prescription today and reimburse yourself years from now, as long as the HSA was already open when the expense was incurred. Expenses paid before you opened the account do not qualify, even if you open it later that same year.⁵

Records to Keep

The IRS requires you to keep records showing that every HSA distribution paid for a qualified medical expense, that the expense was not reimbursed by insurance or another source, and that you did not also claim it as an itemized deduction.⁵ You do not send these with your return, but you need them if you’re asked.

For prescriptions, a pharmacy receipt showing the pharmacy name, patient name, date, medication, and amount is your best evidence. If the receipt only shows a total, keep the prescription label or a printout from the pharmacy. For over-the-counter items, save the itemized store receipt.

Hold onto these records for at least three years after you file the tax return for the year of the distribution.⁶ If you delay reimbursement for years, keep receipts for the whole gap plus three years after the return that reports the eventual distribution.

What Happens If You Use HSA Funds for Something Ineligible

If you spend HSA money on something that isn’t a qualified medical expense, you owe income tax on the amount plus an additional 20% penalty. The distribution goes on Form 8889, filed with your federal return.⁵ For someone in the 22% income tax bracket, a $500 non-qualified purchase could cost roughly $210 in combined tax and penalty.

The 20% penalty goes away at age 65 or if you become disabled. Non-qualified distributions after that are still taxed as ordinary income, but without the extra penalty, so the account works like a traditional retirement account for non-medical spending.¹

1
Office of the Law Revision Counsel. 26 U.S. Code 223 – Health Savings Accounts
2
Office of the Law Revision Counsel. 26 USC 213 – Medical, Dental, Etc., Expenses
3
Internal Revenue Service. IRS Outlines Changes to Health Care Spending Available Under CARES Act
4
Internal Revenue Service. Publication 502 – Medical and Dental Expenses
5
Internal Revenue Service. Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans
6
Internal Revenue Service. How Long Should I Keep Records?