The IRS recently reminded taxpayers that home testing for COVID-19 (coronavirus) is a qualified medical expense for various medical spending and savings accounts. The cost of home testing may be paid or reimbursed with tax-protected funds from an eligible account. Specifically, you may use a health flexible spending arrangement (FSA), health savings account (HSA) or certain other cafeteria plans to pay or receive reimbursement for testing expenses.
Other COVID-related eligible medical expenses include the cost of personal protective equipment (PPE) like masks, hand sanitizer and sanitizing wipes. The equipment must be used primarily to prevent or reduce the spread of coronavirus in order to qualify for FSA, HSA or other medical cafeteria plan reimbursement.
You can maximize the tax benefits of your FSA or HSA by making expenditures or accepting reimbursements at well-chosen times. A tax advisor can help you formulate the best strategy for using your account.