IRS Publication 502: What's Actually Reimbursable

IRS Publication 502 is the government’s working list of what counts as a medical expense under IRC §213(d) — the definition governing the itemized medical deduction and, by reference, what most health plans may reimburse. It covers licensed practitioners, hospital care, prescriptions, dental, vision, hearing, mental health, equipment and medical travel. It excludes cosmetic procedures and general health spending.

It is also the most widely misquoted document in employee benefits, because the list that governs a deduction and the list that governs a reimbursement are close but not identical. That distinction is the first thing below, because it is where most published summaries go wrong.

What Publication 502 Actually Is

Publication 502, Medical and Dental Expenses, is written for individual taxpayers claiming the itemized medical expense deduction on Schedule A. That deduction only reaches expenses above 7.5% of adjusted gross income, which is why most households never use it.

Its influence is much wider than its audience. Publication 502 is the IRS’s plain-language interpretation of IRC §213(d), and §213(d) is the definition that other parts of the code point to. IRC §105(b) — the exclusion that makes employer medical reimbursements tax-free — defines the medical care it covers by reference to §213(d). So do FSAs, HSAs, HRAs and every other reimbursement arrangement.

That is why plan administrators, brokers and CPAs all reach for Publication 502: it is the most usable expression of a definition that governs far more than the deduction it was written for.

The Distinction Most Summaries Get Wrong

Publication 502 is a map, not a plan document. Three places where the deduction rules and the reimbursement rules genuinely diverge:

Over-the-counter drugs. Since the CARES Act in March 2020, over-the-counter medicines and menstrual care products have been reimbursable from an FSA, HSA or HRA without a prescription. They are still generally not deductible under Publication 502, which requires a prescription for anything other than insulin. Reimbursable, not deductible.

Premiums paid with pre-tax dollars. Publication 502 permits a deduction for health insurance premiums — but only premiums paid with after-tax money. Premiums already run through a §125 cafeteria plan are excluded from income once and cannot be deducted a second time. Separately, most health FSAs are barred from reimbursing premiums at all.

Plan terms can be narrower than the law. Nothing requires a plan to reimburse everything §213(d) permits. A plan may cover a defined set of services and no more. Publication 502 tells you the outer boundary of what could be reimbursed. Your plan document tells you what actually is.

Practical rule: use Publication 502 to decide whether something is medical care at all. Use the plan document to decide whether this plan pays for it.

What Counts as a Medical Expense

The categories below track how Publication 502 organizes the universe. This is a working summary, not a substitute for the current edition.

Practitioners and professional services

Fees paid to physicians, surgeons, specialists, dentists, orthodontists, ophthalmologists, optometrists, osteopaths, chiropractors, podiatrists, psychiatrists, psychologists and licensed therapists. Nursing services count, including services provided by someone who is not a nurse, to the extent the work is nursing care rather than household help.

Hospital, facility and procedure costs

Inpatient care, including meals and lodging supplied by the hospital as part of that care. Surgery, laboratory work, diagnostic imaging, and body scans. Ambulance service. Care in a residential treatment facility where the principal reason for being there is medical care.

Prescriptions and drugs

Prescribed medicines and drugs. Insulin, which is the standing exception and needs no prescription. Medicines bought and consumed in another country can generally be included if the drug is legal in both that country and the United States. What is excluded is a drug imported or shipped in that could not legally be brought into the United States.

Dental

Examinations, cleanings, X-rays, fillings, extractions, braces, dentures and oral surgery. Teeth whitening is cosmetic and does not qualify.

Vision

Eye examinations, prescription eyeglasses and contact lenses, contact lens supplies, prescription sunglasses, guide dogs, and vision correction surgery.

Hearing

Hearing examinations, hearing aids and their batteries and repairs, and equipment that displays audio content as text for people with a hearing impairment.

Mental health and substance use

Psychiatric and psychological care, therapy for a diagnosed condition, and inpatient treatment for alcohol or drug addiction, including meals and lodging supplied by the facility.

Pregnancy, fertility and family

Prenatal and postnatal care, delivery, breast pumps and lactation supplies, and fertility treatment intended to overcome an inability to have children. Legal abortion and legal sterilization are included. Controlled substances and procedures that violate federal law are not.

Long-term and in-home care

Qualified long-term care services for a chronically ill individual. Nursing home costs qualify where the principal reason for being there is medical care. Qualified long-term care insurance premiums are deductible up to age-based annual limits that the IRS indexes each year.

Equipment, supplies and devices

Crutches, wheelchairs, walkers, artificial limbs and teeth, braces, oxygen and oxygen equipment, blood sugar test kits, bandages, and diagnostic devices used at home.

Home and vehicle modifications

Capital expenditures made for medical reasons — entrance ramps, widened doorways, lowered cabinets, railings, lifts, and vehicle hand controls. The deductible amount is the cost that exceeds any resulting increase in the property’s value. Where the modification does not increase value, such as most accessibility work, the full cost generally counts.

Travel, transportation and lodging

Transportation primarily for and essential to medical care: bus, taxi, train, plane and ambulance fares, tolls and parking. Personal vehicle use may be taken at actual cost or at the standard medical mileage rate, which changes every year — check the current figure rather than a rate quoted on any website, including this one. Lodging while away from home primarily for medical care is capped by statute at $50 per night per person, and requires that the care be provided in a licensed hospital or equivalent facility with no significant element of personal pleasure or vacation. Meals while traveling are not included unless supplied as part of inpatient care.

Insurance premiums

Premiums for policies covering medical care, including hospitalization, surgical fees, prescription coverage, replacement of lost or damaged contact lenses, and qualified long-term care within the annual limits. Medicare Part B and Part D premiums count, and Part A premiums count where paid voluntarily. Premiums already paid with pre-tax dollars do not, and neither do premiums for policies that pay a guaranteed amount regardless of whether care was received.

What Does Not Count

• Cosmetic procedures — excluded by statute at IRC §213(d)(9) unless necessary to correct a congenital abnormality, an injury from an accident or trauma, or a disfiguring disease.
• General health purchases — toiletries, most vitamins and nutritional supplements, and health club dues, absent a specific diagnosed condition.
• Teeth whitening, hair transplants and electrolysis for appearance.
• Non-prescription nicotine gum and patches, while prescribed smoking cessation programs and prescribed drugs do qualify.
• Maternity clothes, diaper service and childcare, which are family expenses rather than medical care.
• Funeral and burial expenses.
• Amounts already reimbursed by insurance or any other plan. Nothing is counted twice.

The Gray Zone: Expenses That Qualify Only With Direction

A group of expenses are ordinary personal spending for most people and medical care for some. The difference is a diagnosed condition and a practitioner’s direction, documented at the time.

Health club dues where a physician has prescribed exercise for a specific diagnosed condition. Weight-loss programs where a physician has diagnosed obesity, hypertension or heart disease — but not the cost of ordinary food, and not weight loss for general health or appearance. Special diet food only to the extent its cost exceeds the cost of the food it replaces. Home improvements whose medical purpose is documented. Special education where the principal reason for the placement is treatment of a diagnosed condition.

In every one of those cases the documentation is the deciding fact, not the receipt. A practitioner’s recommendation obtained after the purchase carries very little weight.

Whose Expenses You Can Include

Your own, your spouse’s, and your dependents’. Two refinements matter more than they look.

A person can be treated as your dependent for medical expense purposes even if they do not qualify as a dependent generally, because the gross income test and the joint return test are set aside for this purpose. A parent you support is the common case.

For employer plan purposes specifically, IRC §105(b) was amended to reach a child who has not turned 27 by the end of the tax year, whether or not that child is your dependent. This is why adult children can often stay on an employer arrangement past the point where they stop being dependents.

Where parents are divorced or separated, each parent may generally count the medical expenses they personally pay for the child, regardless of which one claims the exemption.

What Changed Recently

Two changes are worth knowing because they postdate most of the summaries you will find elsewhere.

The CARES Act, in March 2020, restored over-the-counter drugs to reimbursable status without a prescription and added menstrual care products, retroactive to January 1, 2020. This changed reimbursement, not the deduction.

Public Law 119-21, enacted July 4, 2025, added IRC §223(c)(1)(E) at section 71308, addressing how direct primary care arrangements are treated for health savings account purposes. It applies to months beginning after December 31, 2025. If direct primary care is part of your benefits design, review it with your advisor against the current guidance.

Publication 502 is reissued every year. Where a figure is indexed — the mileage rate, long-term care premium caps, contribution limits — take it from the current edition rather than from any secondary source.

How Reimbursement Plans Use This List

An employer medical reimbursement plan does not get to define medical care for itself. It inherits the §213(d) definition that Publication 502 explains, and it has to prove that what it reimbursed falls inside it.

Two rules do that work. Treasury Regulation §1.105-2 provides that reimbursements are excludable under §105(b) unless the employee would have received the payment irrespective of whether or not the employee incurs expenses for medical care — which is why a plan paying fixed cash for completing an activity fails and a plan reimbursing documented care does not. And the cafeteria plan substantiation rules at Proposed Treasury Regulation §1.125-6(b) require that a claim be substantiated by an independent third party before it is paid. Self-certification is not enough.

Put plainly: the expense has to be on the §213(d) list, and somebody other than the person being reimbursed has to confirm it happened.

Where SIMERP Fits

A self-insured medical expense reimbursement plan (SIMERP), also written SIMRP under the IRS’s own Publication 15 wording, is an employer plan under IRC §105(b) that reimburses §213(d) medical care delivered by licensed physicians, funded through a §125 cafeteria plan election, sitting alongside existing coverage rather than replacing it.

The reason Publication 502 keeps coming up in these conversations is that it is the boundary. Everything a compliant plan reimburses has to be medical care as the IRS defines it, and this is the document where the IRS defines it in language a business owner can read.

Background on the two spellings is at SIMRP or SIMERP? Why You Will See Both. The compliance analysis is at Is SIMERP Legal? The Definitive Guide to SIMERPs.

Primary Sources

• IRS Publication 502, Medical and Dental Expenses — the list itself, reissued annually.
• IRC §213(d) — the statutory definition of medical care.
• IRC §213(d)(2) — the $50 per night lodging limit.
• IRC §213(d)(9) — the cosmetic surgery exclusion.
• IRC §105(b) — the employer reimbursement exclusion, and the under-27 rule.
• IRC §223 — health savings accounts.
• Treasury Regulation §1.105-2 — the “irrespective” test.
• Proposed Treasury Regulation §1.125-6(b) — third-party substantiation.
• IRS Publication 15 (Circular E), Section 5 — payroll-tax treatment of medical reimbursements.
• IRS Publication 969 — HSAs, FSAs, HRAs and MSAs, for the reimbursement-side rules.

Your Next Step

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