The IRS recently updated its frequently asked questions (FAQs) about medical expenses related to nutrition, wellness and general health to specifically address when the cost of a wearable device is a medical expense that can be paid or reimbursed by a health flexible spending account (FSA), health reimbursement arrangement (HRA) or health savings account (HSA).

Wearable devices are an increasingly popular way to track bodily functions or other health-related information and may include fitness bands, smart rings, smartwatches, patches, sensors or similar devices.

Qualified Medical Expenses

Health FSAs, HRAs and HSAs can be used to pay out-of-pocket costs for qualified medical expenses that are not covered by a health plan. Qualified medical expenses must be incurred primarily to alleviate or prevent a physical or mental defect or illness.

These expenses include payments for:

• medical services rendered by physicians, surgeons, dentists and other practitioners;
• costs of equipment, supplies and diagnostic devices needed for these purposes; and
• the costs of medicines and drugs, whether prescribed by a physician or purchased over the counter

However, expenses that are merely beneficial to general health are not qualified medical expenses.

Wearable Devices

According to the IRS’s FAQs, whether the cost of a wearable device is a medical expense depends on all the facts and circumstances, including the device’s functions and the reason it was purchased and used. The cost of a wearable device that has both medical and nonmedical uses, which include tracking information related to general wellness, fitness or sleep, as well as other personal uses, is not a medical expense merely because the device tracks information that relates to health generally or because it tracks bodily functions like blood pressure or blood glucose levels that are or can be affected by specific diseases.

However, the cost of such a device is a medical expense if the individual purchases and uses the device primarily to assist in the diagnosis, cure, mitigation, treatment or prevention of a specific disease. In determining whether the device was purchased and used primarily for that purpose, relevant facts and circumstances may include:

• A recommendation from a medical practitioner;
• The individual’s symptoms, diagnosis, abnormal test results or risk factors;
• The relationship between the information tracked and the disease being evaluated or managed; and
• The way the information is reviewed or used

A generalized desire to monitor or improve health is not sufficient for the device to be a medical expense. In addition, the cost of any accessories, add-ons or software subscriptions used with the device is a medical expense only if those items are purchased primarily to serve that medical purpose.

^{While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice or services. Readers should always seek professional advice before entering into any commitments.}