Can you use a HSA for formula?

Discover how you can leverage a Health Savings Account (HSA) for covering the costs of infant formula in 2024.

In recent years, health saving accounts (HSAs) have gained popularity as a way for individuals and families to save money for medical expenses. These accounts offer tax advantages and flexibility when it comes to paying for various healthcare needs. Many parents wonder if they can use their HSA funds to purchase formula for their infants. In this article, we will explore the topic of using a HSA for formula and provide updated information for the year 2024.

Can you use HSA for formula?

One of the most common questions asked by parents is whether they can use their HSA for formula purchases. Unfortunately, the answer is no. The Internal Revenue Service (IRS) strictly regulates what qualifies as an eligible medical expense that can be paid for using HSA funds. According to IRS guidelines, eligible medical expenses must be primarily for the prevention, cure, or treatment of a disease or condition.

While formula is essential for the nourishment and well-being of infants, it is not considered a medical expense by the IRS. Therefore, you cannot use your HSA funds to purchase formula for your child. It's important to keep this in mind when planning your healthcare expenses and budgeting for your family's needs.

However, it's worth noting that there are other ways to save money on formula purchases. Many retailers offer discounts, coupons, and rewards programs that can help reduce the cost. Additionally, some states have programs in place to assist families with the cost of formula, especially for those who meet certain income requirements.

Another option to consider is reaching out to local community organizations or non-profit groups that provide support for families in need. These organizations often have resources available to help parents access formula at a reduced cost or even for free. It's always worth exploring these avenues to ensure that your child's nutritional needs are met without straining your budget.

Furthermore, it's important to remember that breastfeeding is a cost-effective alternative to formula feeding. Breast milk provides numerous health benefits for both infants and mothers. If possible, consulting with a lactation specialist or joining a breastfeeding support group can provide valuable information and assistance to help you successfully breastfeed your child.

While the inability to use HSA funds for formula purchases may be disappointing, it's crucial to understand the reasoning behind the IRS regulations. HSAs are designed to help individuals and families cover medical expenses that are directly related to the prevention, cure, or treatment of diseases or conditions. By adhering to these guidelines, HSAs can effectively support healthcare needs while maintaining the integrity of the program.

In conclusion, while HSA funds cannot be used for formula purchases, there are alternative ways to save money and access formula at a reduced cost. Exploring discounts, coupons, rewards programs, state assistance programs, and community resources can help alleviate the financial burden of formula expenses. Additionally, considering breastfeeding as a cost-effective alternative can provide numerous health benefits for both infants and mothers. By being proactive and resourceful, parents can ensure that their child's nutritional needs are met while staying within their budget.

Can you use a health saving account (HSA) for formula?

Since formula is not an eligible medical expense according to IRS guidelines, the same restrictions apply to health saving accounts (HSAs) as mentioned earlier. HSAs can only be used to pay for qualified medical expenses. However, there are other options available to parents who need assistance with the cost of formula.

One alternative option is the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). WIC provides nutritious food, including formula, to low-income families who meet the program's eligibility criteria. Additionally, some states have their own assistance programs that may offer formula benefits to families in need. It is worth exploring these resources if you require financial support for infant formula.

What are the benefits of using a HSA for formula?

Although using a HSA for formula is not allowed, it's still essential to understand the benefits that HSAs offer for other eligible medical expenses. HSAs provide individuals and families with a tax-advantaged way to save money for healthcare costs. Here are some of the benefits:

  1. Tax advantages: Contributions to an HSA are tax-deductible, and any interest or investment earnings grow tax-free. When used for qualified medical expenses, withdrawals from an HSA are also tax-free.
  2. Control over healthcare expenses: By saving money in an HSA, individuals can have more control over their healthcare expenses. They can use the funds for various medical needs, including doctor visits, prescriptions, and medical devices.
  3. Portability: HSAs are portable, meaning the account remains with the individual even if they change jobs or health insurance plans. This allows for continued use and growth of the funds.
  4. Long-term savings: Unlike flexible spending accounts (FSAs), HSAs have no use-it-or-lose-it policy. The funds in an HSA can accumulate over time, providing a valuable resource for future healthcare needs.

What are the downsides of using a HSA for formula?

While HSAs offer many advantages for healthcare expenses, there are a few downsides to consider. These include:

  • Limitations on contributions: HSAs have annual contribution limits set by the IRS. These limits can change each year and currently stand at $3,650 for individuals and $7,300 for families in 2024. If you have high healthcare expenses, you may find it challenging to fully fund your HSA.
  • Health insurance requirements: To be eligible for an HSA, individuals must have a high-deductible health insurance plan. This can limit your choices when it comes to selecting a health insurance plan that suits your needs.
  • Lack of flexibility: As we have discussed, HSAs can only be used for qualified medical expenses. This means that certain healthcare services or items may not be eligible for HSA funds, potentially creating a financial burden for some individuals.

HSA vs FSA for formula

It's important to note the difference between HSAs and flexible spending accounts (FSAs) when it comes to using them for formula. While HSAs cannot be used for formula purchases, FSAs may offer more flexibility in this area. However, it's crucial to check with your employer's FSA plan to determine if formula is an eligible expense, as each plan may have specific rules and regulations.

Where can you find more information about HSA eligibility for formula?

For further information on HSA eligibility and what expenses qualify, it is advisable to consult the official guidance provided by the IRS. The IRS website offers detailed information and resources that can help individuals better understand HSAs and their permitted uses. Additionally, speaking with a tax professional or benefits administrator can provide the latest updates and guidance specific to your financial situation.

In conclusion, while HSAs offer tax advantages and flexibility for healthcare expenses, they cannot be used for formula purchases. The IRS guidelines strictly define eligible medical expenses, and formula does not meet the specified criteria. However, alternative programs such as WIC and state assistance programs can provide support to families in need. Before making any healthcare-related decisions, it is essential to stay informed and seek advice from trusted sources.

What do you do if you're unsure?

If you’re unsure, it’s best to consult your HSA provider or a tax professional to confirm expense eligibility. 

What are HSA benefits for employers?

If you’re an employer, there are multiple benefits to offering HSA to your employees, including:

  • Attracting and retaining talent
  • It’s a cost-effective healthcare option
  • Enhances employee satisfaction and productivity
  • Increases the utilization of employee benefits
  • Has tax advantages for both you and your employees

Want to learn more? Check out our blog on what is an HSA

Get started with Forma today

Looking to offer an HSA as part of your employee benefits package? At Forma, we provide Pre-tax Accounts - including HSAs - to companies worldwide. 

If you want your business to profit from the employee and employer benefits of HSAs, fill out the form below, and one of our experts will be in touch.