Using an HSA or FSA for prescriptions

From 2011 through 2019, a box of over-the-counter allergy tablets could be paid for from a health savings account or flexible spending account only if a prescriber had written a prescription for it. That rule came from section 9003 of the Affordable Care Act, which IRS Notice 2010-59¹ said applied after Dec. 31, 2010.

Section 3702 of the CARES Act², signed March 27, 2020, struck the prescription requirement and added menstrual care products. The change reached back to purchases made after Dec. 31, 2019.

Both accounts can now pay for most medicines, and the 2026 limits are higher than last year's. Even so, the rules for HSAs, FSAs and the itemized medical deduction on a tax return do not line up neatly.

The 2026 limits

An HSA belongs to the account holder and stays with them. A health FSA is an employer plan, usually funded by salary reduction. The IRS sets the limits for both each year.

Sources: Rev. Proc. 2025-19³ (2026 HSA and HDHP figures), Rev. Proc. 2025-32⁴ (2026 FSA figures), and IRS Publication 969⁵ (2025 figures and the catch-up amount).

Employers often add to the HSA. In 2025 the average employer contribution was $690 for single coverage and $1,296 for family coverage among workers in HSA-qualified plans, according to KFF's employer survey⁸.

What counts for prescriptions and OTC medicines

Both accounts pay for "medical care" as section 213(d) of the tax code defines it. Prescription drugs qualify. So does insulin, with or without a prescription. For health FSAs, IRS Publication 969 now says "expenses incurred for over-the-counter medicine (whether or not prescribed) and menstrual care products are considered medical care." The IRS news release on the change⁷ said the same expansion covers HSAs, Archer MSAs and health reimbursement arrangements, and that OTC "products and medications are now reimbursable without a prescription."

In practice, a store-brand pain reliever, antacid or allergy tablet can be bought with account money with no prescription and no letter from a doctor. The IRS release also told taxpayers to "save receipts of their purchases for their records," since an administrator or an audit may ask for them.

Itemized deductions work differently. IRS Publication 502⁶, which covers medical expenses claimed on Schedule A, still says that "except for insulin, you can't include in medical expenses amounts you pay for a drug that isn't prescribed." Its example is aspirin a doctor recommends: not deductible, because aspirin does not require a prescription. An OTC purchase can therefore be reimbursed tax-free from an HSA or FSA but cannot be deducted on a return.

Sources: Publication 969 (2025), Publication 502 (2025), CARES Act section 3702.

Rules that differ between the two accounts

An HSA requires coverage under a qualifying high-deductible plan, covered in High-deductible health plans and generic drugs. The money rolls over from year to year. Publication 969⁵ says expenses incurred before the HSA was established do not count, and that "beginning with the first month you are enrolled in Medicare, you can't contribute." Money taken out for something other than a qualified expense is taxed as income, and an additional 20 percent tax generally applies.

A health FSA is mostly use-it-or-lose-it. Publication 969 says a plan may offer either a grace period of up to two and a half months after the plan year or a carryover, which for 2026 is capped at $680. Which one, if either, is up to the employer's plan document.

Neither account changes the price of a drug. They change only whether the money spent is taxed. A cheap generic stays cheap, as GxRadar's look at what pharmacies pay for a month of common generics shows. GxRadar's analysis of CMS NADAC data⁹ puts the October 2026 pharmacy acquisition cost of 30 amlodipine 5 mg tablets at about 31 cents and 30 famotidine 20 mg prescription tablets at about 86 cents, before dispensing fees and margins. Monthly price histories for 47 generics are on the price tracker.

At the pharmacy counter

Publication 969 notes that HSA distributions include amounts paid with a debit card. However the account is tapped, the purchase still has to be a qualified expense, and an administrator can ask for documentation. A few questions settle most problems before they start:

• Ask the pharmacist for the price with insurance and the cash price; the account can pay either, and How to ask for the cash price has the wording.
• Ask the health plan whether a cash purchase will count toward the deductible, and what receipt it needs to credit one.
• Ask the FSA or HSA administrator what documentation it wants for OTC purchases, and keep the itemized receipt.
• For a 90-day supply or any change to how a prescription is written, ask the prescriber first.

For store-brand OTC products, the active ingredient and strength are printed in the Drug Facts box, explained in Store-brand OTC medicines.

What changed in 2026

A 2025 tax law known as the One Big Beautiful Bill Act made bronze and catastrophic plans sold on the ACA marketplaces count as HSA-qualified high-deductible plans for months beginning after Dec. 31, 2025, according to IRS Notice 2026-5¹⁰. It also made permanent the pre-deductible telehealth safe harbor that began under the CARES Act, and it allowed some direct primary care arrangements alongside an HSA.

Next year's HSA figures will arrive in an IRS revenue procedure; the 2026 version, Rev. Proc. 2025-19, ran in Internal Revenue Bulletin 2025-18. The 2026 FSA limit came in a separate, later revenue procedure (2025-32), and the 2027 FSA figure is expected to arrive the same way.