Is the use of an HSA for a dental crown allowed?

May 5, 2010 12:22 PM

Is the out-of-pocket cost for a new dental crown an acceptable expense for an HSA, if I already have dental insurance? If it is "denied" as an acceptable expense, what happens?

I went to the dentist for my checkup this week and it turns out I need to get a new crown -- a filling broke in a tooth that has 3 fillings in it, and my dentist doesn't think there's enough tooth left to fix the filling. I have dental insurance through my employer, which will pay for half. I will have an out-of-pocket cost of $504 (according to a written estimate from my dentist). Money is tight for me right now, and I want to avoid taking that out of savings if I can.

For health insurance, I have an HSA/HDHP combination through my employer, with a deductible of $1,200 on the HDHP. By the time I go in to get the crown, I will have about $1,800 in my HSA. Therefore, I figure if I can pay for the out-of-pocket costs with my HSA, I will still have enough in the HSA to cover that deductible in the event of catastrophic medical needs.

So now I need to find out if it's a qualified expense. My health insurance company's website referred me to IRS Publication 502, which states:

You can include in medical expenses the amounts you pay for the prevention and alleviation of dental disease. Pre-treatment includes the services of a dental hygienist or dentist for such procedures as teeth cleaning, application of sealants, and fluoride treatments to prevent tooth decay. Treatment to alleviate dental disease include services of a dentist for procedures such as X-rays, fillings, braces, extractions, dentures, and other dental ailments. But see Teeth Whitening under What Expenses Are Not Includible, later.

I would think this falls under the very vague category of "other dental ailments," however, I'm not entirely sure.

My Google-Fu led me here -- which seems to indicate that yes, it is allowed -- though I'm not sure if that applies to a specific HSA or to HSAs in general.

I've been with my current employer for about a year now and this is the first job where I've been forced into an HSA/HDHP setup. I'm fairly healthy, and therefore this is the first time I will have used the HSA, so I'm not quite familiar with how it works yet. Can I still use the HSA, even though my dental insurance will be paying for half the cost of the crown?

My understanding is that if it is not an allowable expense, then I will need to pay income taxes (federal, state, and county) on the $504. Is that correct? If it is, I'm probably better off paying it out of my savings account -- money which has already been taxed.

posted by tckma to Health & Fitness (9 answers total)

Best answer: It should be acceptable to use the HSA for any dental/medical expense that isn't considered cosmetic. The definitive guide is the document you mentioned IRS Publication 502.

Under "What expenses are not included?" the IRS describes cosmetic surgery as:

"Generally, you cannot include in medical expenses the amount you pay for unnecessary cosmetic surgery. This includes any procedure that is directed at improving the patient’s appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease. You generally cannot include in medical ex- penses the amount you pay for procedures such as face lifts, hair transplants, hair removal (electrolysis), and liposuction.

You can include in medical expenses the amount you pay for cosmetic surgery if it is necessary to improve a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease.

Example. An individual undergoes surgery that removes a breast as part of treatment for cancer. She pays a surgeon to reconstruct the breast. The surgery to reconstruct the breast corrects a deformity directly related to the disease. The cost of the surgery is includible in her medical expenses."
posted by jardinier at 12:28 PM on May 5, 2010

correction - the section is called "What Expenses Are Not Includible?"
posted by jardinier at 12:29 PM on May 5, 2010

FWIW, I used an HSA to pay for 2 crowns in 2007 (total cost, more than $3000 USD!), and never experienced any problems.
posted by Vorteks at 12:44 PM on May 5, 2010

Response by poster: Vorteks -- did you have to pay taxes on that $3k? Did you have dental insurance cover any portion of that cost or was it all on the HSA?
posted by tckma at 12:50 PM on May 5, 2010

Best answer: Yes. You can pay for this through your HSA. Mine issues a debit card. When it comes time to pay whatever part of my dental bill the insurance doesn't cover my dentist swipes the card and we're done.
posted by IanMorr at 1:47 PM on May 5, 2010

Best answer: You can use your HSA funds for just about any legitimate medical expense except for the cost of the premium you pay for your high deductible health plan. A dental crown would certainly qualify. The money you put into your HSA is tax free -- it counts as a tax free deduction from your paycheck. So if you pay out of that account for a qualifying expense, the money is effectively tax free. It wasn't taxed when it went in and isn't taxed when it comes out. You can think of it as the government paying for a portion of your health care.
posted by JackFlash at 4:28 PM on May 5, 2010

@tckma - I paid no taxes. HSA funds can be used tax-free to find a lot of things that insurance companies won't cover. Even pseudo-medical stuff like massage therapy and acupuncture may qualify.

Dental insurance covered 50% of the first crown ($1000 of $2000). The dental insurance had a $1000 yearly limit, so the second crown was all from the HSA.

BTW, if you ever DO use money from your HSA for an unqualified expense (I actually used mine at IKEA once, when it had WAAAYYY too much money in it), you not only have to pay state and federal taxes on the money, but you also have to pay a 20% penalty to the IRS! (it was 10%, went up to 20% under the newly-signed healthcare bill). So basically if you ever use the money for non-medical purposes, expect to pay about half of it back to the government at the end of the year. Dental expenses should always be fine though.

I am not a tax or legal expert. This is not legal or tax advice.
posted by Vorteks at 1:36 PM on May 6, 2010

The documentation for my FSA HSA FSAFHC what the hell is it called anyway? the flexible savings account for healthcare. Anyway, the documentation explicitly says that insurance copays are reimbursable. I figure they figure that if the insurance is willing to pay for it, it must be a legitimate medical expense.
posted by Lexica at 7:18 PM on May 6, 2010

@Lexica - FYI, Flex spending accounts and Health Savings Accounts are not the same thing, although they are similar in many ways. Health Savings Accounts are only for people with high deductible health plans.
posted by Vorteks at 9:25 PM on May 6, 2010