can you buy medical marijuana with an hsa card

No, you cannot use an HSA card to buy medical marijuana because it is not considered a qualified medical expense under federal law.

As medical marijuana gains legal status across more states in the U.S., many patients are turning to it for managing chronic pain, anxiety, and other medical conditions.

This guide will provide you with a comprehensive overview of HSAs, the limitations of using them for medical marijuana, and potential alternatives for managing the costs.

Understanding What an HSA Card Is:

A Health Savings Account (HSA) is a tax-advantaged savings account designed to help individuals with high-deductible health plans (HDHPs) cover qualified medical expenses. HSAs provide several benefits:

Tax-free contributions: Money you put into an HSA is pre-tax, reducing your taxable income.

Tax-free growth: Any interest or investment gains in the account are tax-free as long as they are used for qualified medical expenses.

Tax-free withdrawals: Funds withdrawn from your HSA are tax-free if used for qualified healthcare expenses.

HSAs offer flexibility, as the money in the account rolls over from year to year and stays with you, even if you change jobs or insurance plans.

What Are Qualified Medical Expenses for an HSA?

To use your HSA card without tax penalties, the expense must be a qualified medical expense as outlined by the IRS. Common eligible expenses include:

Doctor visits

Prescription medications

Dental treatments

Vision care, including eyeglasses and contacts

Mental health services

Certain medical devices, such as wheelchairs, crutches, and hearing aids

The IRS regularly updates its list of qualified expenses, which can be found in IRS Publication 502. This document helps HSA holders determine whether a medical expense qualifies for tax-free withdrawal.

Is Medical Marijuana a Qualified Medical Expense?

Currently, medical marijuana is not classified as a qualified medical expense under federal tax guidelines. This means that you cannot legally use your HSA funds to purchase medical marijuana, even if a licensed doctor prescribes it for a qualifying condition. Here’s why:

Federal law takes precedence:

While medical marijuana is legal in many U.S. states, it is still classified as a Schedule I controlled substance at the federal level. This classification means that the federal government does not recognize medical marijuana as having any accepted medical use.

IRS regulations:

Because HSAs are governed by federal tax rules, only federally recognized treatments and medications are eligible for HSA coverage. Medical marijuana, therefore, does not qualify, regardless of state law.

Why Medical Marijuana Isn’t Covered by HSAs?

There are a few primary reasons why medical marijuana cannot be purchased with HSA funds:

Federal classification: As mentioned, marijuana remains a Schedule I drug under the Controlled Substances Act, meaning it is not recognized by the federal government as having valid medical uses.

Lack of FDA approval: Medical marijuana has not been approved by the Food and Drug Administration (FDA) as a legitimate treatment. Without FDA approval, it cannot be included in the list of qualified HSA medical expenses.

IRS rules: Since HSA funds are tax-advantaged under federal rules, they must adhere to federal guidelines. Because medical marijuana is illegal under federal law, it is not an eligible expense for HSA reimbursement.

What Happens If You Use an HSA Card to Buy Medical Marijuana?

Attempting to use your HSA card to buy medical marijuana may lead to several consequences:

Transaction blocked: In most cases, the transaction may be denied if you attempt to use your HSA card at a dispensary, as HSA cards are often programmed to reject non-qualified purchases.

Tax penalties: If the transaction goes through, you may face consequences when filing your taxes. The IRS may disallow the expense, requiring you to report the amount as taxable income. Additionally, you could be hit with a 20% penalty for using HSA funds on a non-qualified medical expense.

Record-keeping burden: You’ll need to keep careful records and ensure that all your HSA transactions comply with IRS guidelines, particularly if you’re audited or asked to prove that expenses were for qualified healthcare needs.

Alternatives to Using an HSA for Medical Marijuana:

While you can’t use your HSA card to buy medical marijuana, there are other ways to manage the cost of your treatment. Consider the following options:

Out-of-Pocket Payments:

You can always pay for medical marijuana with cash, debit, or credit cards. Though this doesn’t offer the tax benefits of using an HSA, it allows you to purchase the treatment you need without breaking any rules.

State Assistance Programs:

Some states offer financial assistance programs for patients with specific medical conditions, particularly those who are low-income. These programs can help subsidise the cost of medical marijuana, making it more affordable without using your HSA funds.

Discounts and Loyalty Programs:

Many dispensaries offer discounts or loyalty programs for regular customers. These can help reduce the cost of medical marijuana over time. Be sure to ask your local dispensary about available deals.

Tax Deductions for Medical Marijuana:

While you cannot use an HSA, some states allow medical marijuana to be included as a tax-deductible medical expense. This varies by state, so consult a tax professional or check your state’s tax laws to see if you can write off these expenses at the state level.

Future Changes to HSA Eligibility for Medical Marijuana:

The landscape of medical marijuana laws is rapidly changing. With increasing state-level legislation and growing public acceptance, there’s potential for future federal reclassification of marijuana. If medical marijuana is reclassified under federal law:

It may become FDA-approved: This could allow it to qualify as an HSA-eligible medical expense, just like other prescription medications.

Federal laws may align with state laws: If federal regulations change, HSA guidelines may be updated to include medical marijuana as a qualified expense.

Until federal laws change, though, medical marijuana remains excluded from HSA coverage.

Key Points to Remember:

Medical marijuana is not a qualified HSA expense: You cannot use your HSA card to purchase medical marijuana because of federal restrictions.

Penalties for non-qualified expenses: Using HSA funds for non-qualified purchases like medical marijuana can lead to tax penalties and increased taxable income.

Alternatives are available: Consider out-of-pocket payments, state assistance programs, or tax deductions where applicable to cover the cost of medical marijuana.

Final Thoughts: Managing Medical Marijuana Costs:

Although medical marijuana is becoming more widely accepted as a treatment option, its federal classification still creates hurdles for patients looking to use tax-advantaged healthcare funds like HSAs. While you cannot currently use an HSA card to buy medical marijuana, staying informed about evolving laws and alternative ways to manage your healthcare expenses can help you navigate this changing landscape.

If you rely on medical marijuana, explore your state’s financial assistance programs, take advantage of discounts, and consult a tax advisor about potential state-level deductions. It’s also important to remain updated on any changes in federal law that may open the door to more flexible healthcare savings account usage in the future.

FAQs

1. Can I use my HSA for medical marijuana?

No, medical marijuana is not eligible under HSA guidelines.

2. Why isn’t medical marijuana HSA-eligible?

It’s illegal under federal law and lacks FDA approval.

3.What happens if I use my HSA for it?

You may face tax penalties and have to report it as taxable income.

4.What are alternatives for paying?

Use out-of-pocket payments, state assistance, or tax deductions.

5. Could this change in the future?

Yes, if federal laws and FDA approval change.

Conclusion

You cannot use an HSA card to buy medical marijuana because it is not a qualified medical expense under federal law. Alternatives include out-of-pocket payments, state assistance, or waiting for potential future legal changes.