One of the trends we have noticed over the past couple of years is the rise in Health Savings Accounts (HSA’s). More companies seem to be choosing high-deductible insurance plans and contributing some money to attached HSA’s for their employees as health care costs rise and insurance premiums become unwieldy.
Massage therapy and bodywork is not specifically listed as an “eligible expense” on IRS Publication 502 describing tax deductible Medical and Dental expenses, but neither is it listed as “ineligible”. From what we can gather, a “letter of medical necessity” or a prescription from your physician would push our services into the “eligible” category.
Flexible Spending Accounts (FSA’s) work in the same way.
If you use your HSA/FSA without the safeguard of a prescription or a letter of medical necessity and are audited by the IRS, they could decide that your treatment was not properly documented as a qualified medical expense and that the money you spent is subject to income taxes and a 20% penalty.
The good news is that the threshold for determining medical necessity seems to be relatively low– your physician simply needs to explain it, and that should be sufficient. Here is a sample letter of medical necessity from one HSA. Check the website from your HSA manager to find the form they prefer.