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My wife is in need of a very expensive dental procedure and we are considering the option of Dental Tourism. Specifically, going to Costa Rica to a clinic where we can have the procedure done, including accommodations and airfare tens of thousands of dollars cheaper than just the procedure in the US.

I'm considering using my HSA account to pay for the procedure, which still isn't remotely cheap, and was wondering if there are any limitations on using an HSA for Medical or Dental Tourism. Is there any reason this might not be considered a qualified medical expense? What about the travel costs? Would they be considered qualified if the travel is related to a medical need?

Anything else I should be aware of attempting this?

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    I think you should ask the plan provider about this. – littleadv Feb 23 '15 at 3:00
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    IRS Publication 502 discusses in detail the various types of expenses that are allowed as medical expenses for tax purposes. There are entries in that publication for trips, transportation, lodging, and meals. – Ben Miller Feb 23 '15 at 13:47
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    @littleadv - I'm pretty sure the HSA rules for qualified distributions are defined byt the IRS and not my plan. – JohnFx Feb 24 '15 at 4:58
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    @JohnFx yeah... except the thing is that the plan administrator is the one actually putting the rubber stamp saying "qualified" on your claim. Whether they accept your claim as within the IRS limits or not may not be so easy to determine. – littleadv Feb 24 '15 at 5:03
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    @Littleadv Did not know that. Interesting. – JohnFx Feb 24 '15 at 13:35
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According to IRS Pub 502:

You can include in medical expenses amounts you pay for transportation to another city if the trip is primarily for, and essential to, receiving medical services. You may be able to include up to $50 for each night for each person. You can include lodging for a person traveling with the person receiving the medical care. For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Meals are not included. See Lodging , earlier.

You cannot include in medical expenses a trip or vacation taken merely for a change in environment, improvement of morale, or general improvement of health, even if the trip is made on the advice of a doctor. However, see Medical Conferences , earlier.

My interpretation of this would be the following test: 1. Is the trip primarily for the procedure? According to your statements, yes. 2. Is the trip essential to receiving the care? According to your statements, yes, because you can save a lot of money by doing this compared to having just the procedure done in the US. (Or maybe you cannot afford it otherwise.)

It appears to me that you can deduct the cost of the procedure, the airfare, and then $100/night. If it were me I would document a few different quotes from dentists local to you showing that it is in fact more expensive like you said it is, and file that away with your receipts. It also would be a good idea to ask the dentist in Costa Rica how much just the procedure is by itself, and then the airfare too, because you'll likely need that in your calculation of how much to deduct. Also, make sure the itemized cost of the procedure itself is "reasonable". If the trip costs 10K, and they tell you that the deductible parts equal $9,999, and then $1 is for food, entertainment, etc, that is likely not reasonable in the eyes of an auditor. Also, in general, remember that just because you're saving money and getting A + B (B for bonus) instead of just A, that doesn't mean that B is deductible. One has nothing to do with the other.

Lastly, for deductions of this magnitude, I'd highly recommend talking to an accountant, because I am not one. (And if you do, please report back. I'm curious to know where they agree/disagree with me.)

  • Do you think that he will be able to deduct the full $100 a night for both him and his wife? I know it says that you can deduct for a parent traveling with a child, but can you deduct for a husband traveling with his wife? – Ben Miller Feb 24 '15 at 23:56
  • My guess is yes, because of the wording "you CAN include" and there is no qualifier at the end of the sentence. If someone needs assistance or supervision in some way after a procedure, (in my opinion) any other person should suffice, regardless of whether the patient is a child or not. That being said, I thought the same thing as you when I read the example, which I think is a bad one if I'm right, since it implies that there could be rules attached to which people can deduct $50/night. I guess it can't be just true for a child. What about a very old or disabled person who needs assistance? – TTT Feb 25 '15 at 17:11
  • And, either way, I don't think the $50/day difference in the deduction will have any effect on the overall decision. Furthermore, I would think if you brought your entire family you could deduct more than $100, as long as it doesn't exceed the actual cost per night. – TTT Feb 25 '15 at 17:15
  • The $50/day might not be a big difference, but if you can't expense an extra $50/day for the spouse's lodging, then you can't expense for his airfare either. In any case, I suspect that you are right that a spouse's expenses would be allowed, but it is probably worth asking a tax professional. – Ben Miller Feb 25 '15 at 17:48
  • Good point. I agree. – TTT Feb 25 '15 at 20:47

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