IRS HSA/FSA Eligibility Explained by a Head of Compliance
Sam O'Keefe
Co-founder & CEO of Flex
Updated: February 12, 2026
What makes a product or service an IRS qualified FSA/HSA expense?
The foundation of HSA/FSA eligibility: IRC § 213(d)
Eligibility begins with Internal Revenue Code (IRC) Section 213, originally published on August 16th 1954, as part of the Internal Revenue Code of 1954, to provide a framework for U.S. citizens to deduct unreimbursed medical expenses that exceeded a portion of their adjusted gross income.
IRC § 213(d) defined medical care expenses as amounts paid for:
The diagnosis, cure, mitigation, treatment, or prevention of disease, or
for the purpose of affecting any part or function of the human body.
The tax code further clarified that medical expenses included:
Transportation primarily for and essential to medical care as previously defined
Qualified long-term care services
Insurance (including amounts paid as premiums) covering medical care
Expenses incurred for the taxpayer, spouse, or a dependent
Clarifying the list of eligible items: IRS Publication 502
Several decades later in the late 1990s, the IRS released IRS Publication 502 to serve as the practical explanation of IRC Section 213(d). The relationship between IRC Section 213(d) and IRS Publication 502 can be interpreted as “the law” and “the user manual,” as Publication 502 operationalizes the Section 213(d) framework with examples and edge cases.
An important example of how IRS Publication 502 operationalizes the IRC Section 213(d) is the clarification that “Medical expenses exclude those which are “merely beneficial to general health.” This distinction—medical treatment versus general wellness—remains central to eligibility determinations today.
Publication 502 also provides examples of list of qualifying expenses; though the IRS is clear that the list is non-exhaustive, intentionally allowing room for interpretation and future expansion. Ultimately, this means there is no ‘official’ IRS list of HSA/FSA eligible items, however, this flexibility is the reason new products and services continue to enter the HSA/FSA ecosystem every year.
Expanding eligibility: the 2020 CARES Act
The IRS operates under powers granted by Congress, meaning federal legislation, executive actions, and IRS guidance (such as Revenue Rulings and Notices) can materially expand or modify HSA/FSA rules.
A notable Congressional Act is the CARES Act of 2020, which permanently expanded FSA-eligible expenses to include Over-the-counter (OTC) medications without a prescription, and menstrual care products.
These categories were not explicitly listed in Publication 502, underscoring how Congressional action can directly shape eligibility beyond the IRS’s original framework. Here’s a shortlist of other noteworthy expansions:
Medical Conferences (2000) - formally added after Revenue Ruling 2000-24 allowing for the deduction of registration fees and transportation for conferences related to the chronic illness of a taxpayer or their dependent
Weight-Loss Programs (2002) - formally added after Revenue Ruling 2002-19 allowing for the deduction of weight reduction program fees and meetings for those diagnosed with obesity or hypertension
Fertility Enhancements (2003) - formally added after Revenue Ruling 2003-57, clarified the deduction for procedures affecting a structure and function of the body (the IRS added the specific section titled “Fertility Enhancements” to Publication 502 in 2003 explicitly calling out in vitro fertilization, temporary storage of eggs and sperm, and surgery reversing surgery that prevented the person operated on from having children)
The foundation of HSA/FSA eligibility: IRC § 213(d)
Eligibility begins with Internal Revenue Code (IRC) Section 213, originally published on August 16th 1954, as part of the Internal Revenue Code of 1954, to provide a framework for U.S. citizens to deduct unreimbursed medical expenses that exceeded a portion of their adjusted gross income.
IRC § 213(d) defined medical care expenses as amounts paid for:
The diagnosis, cure, mitigation, treatment, or prevention of disease, or
for the purpose of affecting any part or function of the human body.
The tax code further clarified that medical expenses included:
Transportation primarily for and essential to medical care as previously defined
Qualified long-term care services
Insurance (including amounts paid as premiums) covering medical care
Expenses incurred for the taxpayer, spouse, or a dependent
Clarifying the list of eligible items: IRS Publication 502
Several decades later in the late 1990s, the IRS released IRS Publication 502 to serve as the practical explanation of IRC Section 213(d). The relationship between IRC Section 213(d) and IRS Publication 502 can be interpreted as “the law” and “the user manual,” as Publication 502 operationalizes the Section 213(d) framework with examples and edge cases.
An important example of how IRS Publication 502 operationalizes the IRC Section 213(d) is the clarification that “Medical expenses exclude those which are “merely beneficial to general health.” This distinction—medical treatment versus general wellness—remains central to eligibility determinations today.
Publication 502 also provides examples of list of qualifying expenses; though the IRS is clear that the list is non-exhaustive, intentionally allowing room for interpretation and future expansion. Ultimately, this means there is no ‘official’ IRS list of HSA/FSA eligible items, however, this flexibility is the reason new products and services continue to enter the HSA/FSA ecosystem every year.
Expanding eligibility: the 2020 CARES Act
The IRS operates under powers granted by Congress, meaning federal legislation, executive actions, and IRS guidance (such as Revenue Rulings and Notices) can materially expand or modify HSA/FSA rules.
A notable Congressional Act is the CARES Act of 2020, which permanently expanded FSA-eligible expenses to include Over-the-counter (OTC) medications without a prescription, and menstrual care products.
These categories were not explicitly listed in Publication 502, underscoring how Congressional action can directly shape eligibility beyond the IRS’s original framework. Here’s a shortlist of other noteworthy expansions:
Medical Conferences (2000) - formally added after Revenue Ruling 2000-24 allowing for the deduction of registration fees and transportation for conferences related to the chronic illness of a taxpayer or their dependent
Weight-Loss Programs (2002) - formally added after Revenue Ruling 2002-19 allowing for the deduction of weight reduction program fees and meetings for those diagnosed with obesity or hypertension
Fertility Enhancements (2003) - formally added after Revenue Ruling 2003-57, clarified the deduction for procedures affecting a structure and function of the body (the IRS added the specific section titled “Fertility Enhancements” to Publication 502 in 2003 explicitly calling out in vitro fertilization, temporary storage of eggs and sperm, and surgery reversing surgery that prevented the person operated on from having children)
The foundation of HSA/FSA eligibility: IRC § 213(d)
Eligibility begins with Internal Revenue Code (IRC) Section 213, originally published on August 16th 1954, as part of the Internal Revenue Code of 1954, to provide a framework for U.S. citizens to deduct unreimbursed medical expenses that exceeded a portion of their adjusted gross income.
IRC § 213(d) defined medical care expenses as amounts paid for:
The diagnosis, cure, mitigation, treatment, or prevention of disease, or
for the purpose of affecting any part or function of the human body.
The tax code further clarified that medical expenses included:
Transportation primarily for and essential to medical care as previously defined
Qualified long-term care services
Insurance (including amounts paid as premiums) covering medical care
Expenses incurred for the taxpayer, spouse, or a dependent
Clarifying the list of eligible items: IRS Publication 502
Several decades later in the late 1990s, the IRS released IRS Publication 502 to serve as the practical explanation of IRC Section 213(d). The relationship between IRC Section 213(d) and IRS Publication 502 can be interpreted as “the law” and “the user manual,” as Publication 502 operationalizes the Section 213(d) framework with examples and edge cases.
An important example of how IRS Publication 502 operationalizes the IRC Section 213(d) is the clarification that “Medical expenses exclude those which are “merely beneficial to general health.” This distinction—medical treatment versus general wellness—remains central to eligibility determinations today.
Publication 502 also provides examples of list of qualifying expenses; though the IRS is clear that the list is non-exhaustive, intentionally allowing room for interpretation and future expansion. Ultimately, this means there is no ‘official’ IRS list of HSA/FSA eligible items, however, this flexibility is the reason new products and services continue to enter the HSA/FSA ecosystem every year.
Expanding eligibility: the 2020 CARES Act
The IRS operates under powers granted by Congress, meaning federal legislation, executive actions, and IRS guidance (such as Revenue Rulings and Notices) can materially expand or modify HSA/FSA rules.
A notable Congressional Act is the CARES Act of 2020, which permanently expanded FSA-eligible expenses to include Over-the-counter (OTC) medications without a prescription, and menstrual care products.
These categories were not explicitly listed in Publication 502, underscoring how Congressional action can directly shape eligibility beyond the IRS’s original framework. Here’s a shortlist of other noteworthy expansions:
Medical Conferences (2000) - formally added after Revenue Ruling 2000-24 allowing for the deduction of registration fees and transportation for conferences related to the chronic illness of a taxpayer or their dependent
Weight-Loss Programs (2002) - formally added after Revenue Ruling 2002-19 allowing for the deduction of weight reduction program fees and meetings for those diagnosed with obesity or hypertension
Fertility Enhancements (2003) - formally added after Revenue Ruling 2003-57, clarified the deduction for procedures affecting a structure and function of the body (the IRS added the specific section titled “Fertility Enhancements” to Publication 502 in 2003 explicitly calling out in vitro fertilization, temporary storage of eggs and sperm, and surgery reversing surgery that prevented the person operated on from having children)
Categories of HSA/FSA eligibility: industry standards
Over time, the HSA/FSA industry has converged on two commonly accepted eligibility categories: Always Eligible and Dual-Purpose. While these terms do not appear verbatim in IRS guidance, they are widely used to operationalize IRS rules in practice.
It is also worth noting that although Publication 502 was written for tax deductions, it remains the primary reference point for HSA/FSA eligibility determinations.
"Always Eligible" expenses
“Always Eligible” products and services have a clear, primary medical purpose that squarely fits the IRS definition of a medical expense. These items are used directly to diagnose, treat, mitigate, or prevent disease, or to affect a bodily function.
Common examples include:
Hearing aids for hearing loss
Wheelchairs for mobility impairments
Diagnostic eye exams
Breast pumps used to support lactation
Many of these examples are explicitly listed in Publication 502, which is why HSA and FSA administrators often rely on them as benchmarks when building eligibility guidelines.
"Dual-Purpose" expenses
Dual-Purpose products and services are items that may be used for general health or personal wellness, but can also serve a legitimate medical purpose when used to treat or manage a diagnosed condition. These types of products require more scrutiny before expensing them to your HSA/FSA funds.
This is where the concept of a Letter of Medical Necessity (LMN) becomes essential. While the term itself does not appear in IRS publications, its use can be traced back to IRS clarifications around the year 2000. At that time, Publication 502 was updated to state that nutritional supplements, vitamins, herbal products, and similar items are not eligible unless:
They are recommended by a medical practitioner, and
They are intended to treat a specific medical condition diagnosed by a physician
This clarification created a formal pathway for conditional eligibility—not only for supplements, but for a broad range of products and services. Today, items such as fitness equipment, weight-loss programs, and certain skincare products may qualify as HSA/FSA expenses when supported by a valid LMN.
Over time, the HSA/FSA industry has converged on two commonly accepted eligibility categories: Always Eligible and Dual-Purpose. While these terms do not appear verbatim in IRS guidance, they are widely used to operationalize IRS rules in practice.
It is also worth noting that although Publication 502 was written for tax deductions, it remains the primary reference point for HSA/FSA eligibility determinations.
"Always Eligible" expenses
“Always Eligible” products and services have a clear, primary medical purpose that squarely fits the IRS definition of a medical expense. These items are used directly to diagnose, treat, mitigate, or prevent disease, or to affect a bodily function.
Common examples include:
Hearing aids for hearing loss
Wheelchairs for mobility impairments
Diagnostic eye exams
Breast pumps used to support lactation
Many of these examples are explicitly listed in Publication 502, which is why HSA and FSA administrators often rely on them as benchmarks when building eligibility guidelines.
"Dual-Purpose" expenses
Dual-Purpose products and services are items that may be used for general health or personal wellness, but can also serve a legitimate medical purpose when used to treat or manage a diagnosed condition. These types of products require more scrutiny before expensing them to your HSA/FSA funds.
This is where the concept of a Letter of Medical Necessity (LMN) becomes essential. While the term itself does not appear in IRS publications, its use can be traced back to IRS clarifications around the year 2000. At that time, Publication 502 was updated to state that nutritional supplements, vitamins, herbal products, and similar items are not eligible unless:
They are recommended by a medical practitioner, and
They are intended to treat a specific medical condition diagnosed by a physician
This clarification created a formal pathway for conditional eligibility—not only for supplements, but for a broad range of products and services. Today, items such as fitness equipment, weight-loss programs, and certain skincare products may qualify as HSA/FSA expenses when supported by a valid LMN.
Over time, the HSA/FSA industry has converged on two commonly accepted eligibility categories: Always Eligible and Dual-Purpose. While these terms do not appear verbatim in IRS guidance, they are widely used to operationalize IRS rules in practice.
It is also worth noting that although Publication 502 was written for tax deductions, it remains the primary reference point for HSA/FSA eligibility determinations.
"Always Eligible" expenses
“Always Eligible” products and services have a clear, primary medical purpose that squarely fits the IRS definition of a medical expense. These items are used directly to diagnose, treat, mitigate, or prevent disease, or to affect a bodily function.
Common examples include:
Hearing aids for hearing loss
Wheelchairs for mobility impairments
Diagnostic eye exams
Breast pumps used to support lactation
Many of these examples are explicitly listed in Publication 502, which is why HSA and FSA administrators often rely on them as benchmarks when building eligibility guidelines.
"Dual-Purpose" expenses
Dual-Purpose products and services are items that may be used for general health or personal wellness, but can also serve a legitimate medical purpose when used to treat or manage a diagnosed condition. These types of products require more scrutiny before expensing them to your HSA/FSA funds.
This is where the concept of a Letter of Medical Necessity (LMN) becomes essential. While the term itself does not appear in IRS publications, its use can be traced back to IRS clarifications around the year 2000. At that time, Publication 502 was updated to state that nutritional supplements, vitamins, herbal products, and similar items are not eligible unless:
They are recommended by a medical practitioner, and
They are intended to treat a specific medical condition diagnosed by a physician
This clarification created a formal pathway for conditional eligibility—not only for supplements, but for a broad range of products and services. Today, items such as fitness equipment, weight-loss programs, and certain skincare products may qualify as HSA/FSA expenses when supported by a valid LMN.
How FSA vs HSA eligible expenses are different
Eligibility rules can differ between HSAs and FSAs due to account ownership. HSAs are individually owned accounts governed primarily by IRS rules, while FSAs are employer-sponsored and employer-owned, so the employer has discretion to define what is reimbursable under their specific plan.
While most employers align their FSA policies with IRS guidance—particularly for Always-Eligible expenses—they may apply stricter standards to Dual-Purpose items. In some cases, even a valid Letter of Medical Necessity may not guarantee reimbursement under an employer’s FSA plan.
For this reason, FSA participants should always consult their employer’s specific eligibility guidelines. At Flex, we consistently recommend this step to avoid reimbursement issues, especially for Dual-Purpose expenses.
Here at Flex, we help merchants unlock additional revenue by providing a tool that can auto-substantiate healthcare purchases at checkout that follow IRS rules and guidelines rigorously. Speak to one of our HSA/FSA payments experts to learn more about how we’re doing that.
Eligibility rules can differ between HSAs and FSAs due to account ownership. HSAs are individually owned accounts governed primarily by IRS rules, while FSAs are employer-sponsored and employer-owned, so the employer has discretion to define what is reimbursable under their specific plan.
While most employers align their FSA policies with IRS guidance—particularly for Always-Eligible expenses—they may apply stricter standards to Dual-Purpose items. In some cases, even a valid Letter of Medical Necessity may not guarantee reimbursement under an employer’s FSA plan.
For this reason, FSA participants should always consult their employer’s specific eligibility guidelines. At Flex, we consistently recommend this step to avoid reimbursement issues, especially for Dual-Purpose expenses.
Here at Flex, we help merchants unlock additional revenue by providing a tool that can auto-substantiate healthcare purchases at checkout that follow IRS rules and guidelines rigorously. Speak to one of our HSA/FSA payments experts to learn more about how we’re doing that.
Eligibility rules can differ between HSAs and FSAs due to account ownership. HSAs are individually owned accounts governed primarily by IRS rules, while FSAs are employer-sponsored and employer-owned, so the employer has discretion to define what is reimbursable under their specific plan.
While most employers align their FSA policies with IRS guidance—particularly for Always-Eligible expenses—they may apply stricter standards to Dual-Purpose items. In some cases, even a valid Letter of Medical Necessity may not guarantee reimbursement under an employer’s FSA plan.
For this reason, FSA participants should always consult their employer’s specific eligibility guidelines. At Flex, we consistently recommend this step to avoid reimbursement issues, especially for Dual-Purpose expenses.
Here at Flex, we help merchants unlock additional revenue by providing a tool that can auto-substantiate healthcare purchases at checkout that follow IRS rules and guidelines rigorously. Speak to one of our HSA/FSA payments experts to learn more about how we’re doing that.
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