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Health Savings Account (HSA) Reimbursement For Your ESA or PSD

What are the guidelines for HSA Reimbursement and using this for your ESA or PSD? We’ve got your answers here.
Expert reviewed by:  
Written by:
Susana Bradford
Published on:  
November 4, 2022

Even if you have a Health Savings Account (HSA), knowing exactly what an HSA reimbursement is can be extremely confusing. As healthcare costs continue to rise, it's more important than ever to find ways to manage your medical expenses. 

According to the CDC, the average American spent $11,582 on healthcare in 2019. Thankfully, there are cost-saving tools to help you cut down on healthcare costs. Utilizing an HSA and making HSA reimbursements is a great way to save a little extra money on healthcare. 

If you are enrolled in a high-deductible health plan (HDHP), you are eligible to open and contribute to a health savings account. An HSA is a special savings account that can be used to pay for qualified medical expenses, including doctor’s visits, prescription pills, and even service animals. This cohesive guide will explain exactly how an HSA reimbursement works and how you can use the money in this account for service animal expenses. 

How Does HSA Reimbursement Work?

When you want to use your HSA funds to pay for a qualified expense, you have two HSA reimbursement paths you can take. First, you can pay for expenses with funds directly from your HSA. Second, you can pay for your expenses out of pocket and reimburse yourself later. 

Paying Directly from Your HSA

If you choose to pay directly from your HSA account, you can use three payment methods: HSA debit card, checks, or online payments. You can use an HSA debit card just like you would use a regular debit card to make a purchase. For instance, if you are paying for a doctor’s visit and want to use funds in your HSA, simply hand over your HSA debit card. This is arguably the easiest way to pay for your ESA. 

If you want to make payments online, consult your HSA administrator. Many HSA administrators offer an online bill payment option that allows members to make payments using an online portal. 

Paying Out of Pocket and Reimbursing Later

Whether you are undergoing an expensive procedure or dealing with a lot of medical expenses all at once, there may be times when you don’t have enough money in your HSA to cover certain expenses. If this situation applies to you, don’t worry. As long as your purchase was made after your HSA account was established, you can make an HSA reimbursement. 

If you wish to make an HSA reimbursement for an expense you have already paid for, you will need to request reimbursement from your HSA administrator. Every administrator will be slightly different, but most will offer several straightforward options. You may be able to sign into your HSA web portal and transfer money from your HSA into your bank account or write a check to yourself from your HSA account and deposit the money into your regular bank account. You might also be allowed to withdraw money from your HSA account using your HSA debit card. 

Other Factors To Keep In Mind

Regardless of how you choose to make an HSA reimbursement, keeping track of your receipts and purchases is important. You will report your total withdrawals to the IRS every year on a 1099-SA form. These receipts will prove to the IRS that you made qualified medical expenses. The more organized you are, the better off you will be. 

For 2022, you can contribute up to $3,650 for self-only coverage and up to $7,300 for family coverage into an HSA, according to Healthcare.gov. Unlike an FSA, you don’t need to spend all of the money in your HSA account by the end of a 12-month period as the funds roll over from year to year. An HSA may also earn interest or other earnings. These earnings are not taxable. 

How to Use HSA Reimbursements for Service Animals

If you are trying to make an HSA reimbursement for your service animal, you’ve come to the right place. Here are the two things you need to assess before making an HSA reimbursement for your service animal.  

1. Does Your Assistance Animal Qualify?

Before you bank on being able to use HSA funds to cover fees for your assistance animal, you want to make sure that your assistance animal is HSA-eligible. For an assistance animal to be HSA-eligible, its primary purpose must be medical care. This means that therapy animal expenses and companion animal expenses can not be covered by funds in your HSA. However, service animals, and in some cases, emotional support animals, may be HSA-eligible.

According to the Americans with Disabilities Act, a service animal is defined as a dog or miniature horse that is individually trained to do work or perform tasks for a person with a disability. A service animal could be a dog trained to alert someone who is deaf or a dog trained to calm a person with post-traumatic stress disorder (PTSD), among other things. Meanwhile, emotional support animals can assist with conditions like fear/phobias, anxiety, depression, bipolar disorder/mood disorder, and other psychological and emotional disorders. 

2. Does Your Assistance Animal Qualify?

For your service animal to be eligible for HSA reimbursement, you must receive a letter of medical necessity (LMN) from a medical professional. An LMN verifies the services or items you purchase to diagnose, treat, or prevent a disease or medical condition. Your LMN will confirm that your physical or mental disorder would better benefit from the assistance of a service animal than other forms of treatment or medication. This letter is required by the IRS for certain eligible expenses. Failure to provide this document will mean that your service dog or emotional support animal expenses will not be covered by your HSA, and your HSA reimbursement will be denied. 

The Bottom Line

Owning a service animal is expensive. According to the National Service Animal Registration, it costs $15,000-$30,000 to purchase a service animal, and that is just the upfront cost. To help manage your service animal expenses, you can make HSA reimbursements by establishing an HSA account. 

To make an HSA reimbursement for your service dog, you must have a letter of medical necessity (LMN) provided to you by a medical professional. An LMN will prove that your assistance animal's primary purpose is medical treatment and that a service dog can better benefit you than any other form of treatment or medicine. 

To make an HSA reimbursement, you can either pay directly through your account or out of pocket and reimburse your expense later. You can use your HSA debit card, check, or an online portal to make these payments, regardless of the method that you choose to use.

Meet the author:
Susana Bradford

Susana is an avid animal lover and has been around animals her entire life, and has volunteered at several different animal shelters in Southern California. She has a loving family at home that consists of her husband, son, two dogs, and one cat. She enjoys trying new Italian recipes, playing piano, making pottery, and outdoor hiking with her family and dogs in her spare time.