An FSA, or Flexible Spending Account, lets you set aside pre-tax money from your paycheck to pay for eligible medical expenses. The IRS decides what counts. Generally, anything used to diagnose, treat, or prevent a disease qualifies. But not everything you think is medical will pass the test. Knowing the difference between what is covered and what is not can save you from losing money at the end of the plan year.
What Qualifies For Fsa?
The IRS defines eligible expenses as those that are primarily for medical care. This includes visits to doctors, prescription medications, and medical equipment. The key phrase is “primarily for medical care.” If an item has a general health benefit but is not treating a specific condition, it likely does not qualify. For example, a standard gym membership does not qualify because it is for general fitness, not a prescribed treatment.
Over-the-counter (OTC) medications now qualify with a prescription. Since the CARES Act of 2020, you no longer need a prescription for most OTC drugs. This includes pain relievers, cold medicine, and allergy pills. However, you still need a prescription for items like vitamins and supplements unless they are specifically for a diagnosed medical condition.
What Medical Services Are Covered?
Most direct medical care is covered without question. This includes copays, deductibles, and coinsurance for doctor visits, hospital stays, and surgery. Dental and vision care are also covered. This includes cleanings, fillings, eyeglasses, contact lenses, and LASIK surgery. Chiropractic care, acupuncture, and physical therapy are eligible when treating a specific condition.
Mental health services are covered too. Therapy sessions with a licensed psychologist or psychiatrist qualify. So do psychiatric hospital stays and substance abuse treatment. Some plans cover these services only if you have a formal diagnosis. Check with your plan administrator if you are unsure about a specific service.
Which Medical Products Can You Buy?
A wide range of products qualifies for FSA reimbursement. Common items include blood pressure monitors, thermometers, and first aid supplies. Diabetes supplies like test strips and glucose meters are covered. So are nebulizers, crutches, and wheelchairs. Many people use their FSA for contact lens solution, reading glasses, and sunscreen with SPF 15 or higher.
Menstrual care products now qualify as well. The CARES Act expanded coverage to include tampons, pads, and menstrual cups. Pregnancy test kits and fertility monitors are also eligible. Breast pumps and lactation supplies are covered, which is helpful for new parents.
Some items surprise people. Bandages, gauze, and wound care supplies qualify. So do heating pads, ice packs, and compression stockings. Sleep aids like CPAP machines and supplies are covered if prescribed for sleep apnea. Always keep your receipt and any required documentation in case your plan asks for proof.
What Does NOT Qualify For FSA?
Many everyday health-related items do not qualify. Toothpaste, deodorant, and shampoo are not eligible because they are for general hygiene, not medical care. Cosmetic procedures like teeth whitening and elective plastic surgery are excluded. Weight loss programs only qualify if a doctor diagnoses you with obesity or a related medical condition.
Vitamins and supplements are generally not covered. The IRS considers them nutritional, not medical. The exception is when a doctor prescribes them for a specific condition, like iron supplements for anemia. Even then, you must have a written prescription from your healthcare provider.
Baby products like diapers and baby wipes do not qualify. Neither do most over-the-counter skincare products like moisturizers or acne creams. The line between cosmetic and medical can be blurry. If a dermatologist prescribes a special cream for a skin condition, it may qualify. If you buy it for general skin health, it will not.
How Do FSA Deadlines Work?
FSAs typically run on a plan year, which may not match the calendar year. Most plans have a use-it-or-lose-it rule. This means money left in your account at the end of the year is forfeited. Some plans offer a grace period of up to 2.5 months after the plan year ends. Others allow you to carry over up to $640 per year. Check your specific plan documents to know your options.
To avoid losing money, plan your spending throughout the year. Some people front-load their FSA for known expenses like prescriptions and doctor copays. Others use the account for planned procedures like dental work or new glasses. If you expect a large medical expense, you can schedule it before the plan year ends.
How Do You Get Reimbursed?
Most FSAs come with a debit card that you can use at pharmacies and doctor offices. The card automatically deducts from your account balance. For some purchases, you may need to submit a claim with a receipt. This is common for items that are not automatically verified at the point of sale.
Keep all your receipts, even if you use the debit card. Your plan administrator may request documentation later. If you use the card for an ineligible item, you will need to repay the amount. This can happen if you accidentally buy something that does not qualify. Save your Explanation of Benefits from insurance as proof of medical services.
If you have a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA), the rules are slightly different. HSAs are not tied to an employer and the money rolls over year after year. HRAs are funded by the employer. The eligible expenses are largely the same, but the mechanics differ. Know which account you have and read the terms carefully.
Can You Use FSA For Family Members?
Yes, you can use your FSA to pay for eligible expenses for your spouse and dependents. This includes your children up to age 26, even if they are not on your health insurance. You can also use it for someone you claim as a dependent on your taxes. The expense must be for a person who is covered under the terms of your plan.
This is useful for families with children who need braces, glasses, or allergy medication. You can pay for these expenses with pre-tax dollars. This lowers your taxable income and effectively gives you a discount on medical care. The savings depend on your tax bracket, but most people save 20-30% on eligible expenses.
What About Online Purchases And FSA Stores?
Many online retailers now mark items as FSA-eligible. This makes shopping easier because you can see what qualifies before you buy. Large retailers like Amazon and CVS have dedicated FSA store sections. These sections are helpful, but they are not always perfect. Always double-check the IRS rules before purchasing.
Some items sold in FSA stores may not actually qualify. The retailer is responsible for labeling, but mistakes happen. If you are unsure about an item, search the IRS Publication 502 for guidance. This publication lists eligible medical expenses in detail. It is the most reliable source for determining what qualifies.
Frequently Asked Questions
Can I use my FSA for vitamins?
No, vitamins and supplements generally do not qualify unless a doctor prescribes them for a specific medical condition. You must have a written prescription to use your FSA for these items.
Does an FSA cover dental work?
Yes, most dental services qualify, including cleanings, fillings, and orthodontics. You can also use your FSA for dental copays and deductibles.
Can I buy sunscreen with my FSA card?
Yes, sunscreen with SPF 15 or higher is an eligible FSA expense. This applies to any sunscreen that protects against UV radiation.
What happens to my FSA money at the end of the year?
It depends on your plan. Many plans have a use-it-or-lose-it rule, but some offer a grace period of up to 2.5 months or allow you to carry over up to $640. Check your plan documents for the specific rules that apply to you.
