What Can I Spend My FSA On?

When planning your healthcare expenses, it's essential to know what can be covered using your Flexible Spending Account (FSA). An FSA can significantly ease the financial burden of medical expenses, allowing you to pay for various health-related costs with tax-free dollars. This guide provides an in-depth look at the eligible expenses, usage rules, and strategies to maximize your FSA benefits.

Understanding FSAs

What is an FSA?

A Flexible Spending Account (FSA) is a pre-tax benefit account offered by many employers. You can use the funds in the account to pay for certain out-of-pocket healthcare costs. Money is voluntarily deducted from your paycheck and deposited into this account before taxes, effectively reducing your taxable income.

Key Features of FSAs

1. Tax Savings: Contributions are made with pre-tax dollars, reducing your taxable income.
2. Annual Contribution Limits: The IRS sets annual contribution limits. For 2023, the limit is $3,050 per employee.
3. Use-It-Or-Lose-It Rule: Funds must typically be used by the end of the plan year, although some plans offer a grace period or a carryover option for unused funds.

Eligible FSA Expenses

Knowing the types of expenses you can cover with your FSA is crucial for maximizing this benefit. Here's a detailed list of eligible expenses:

Medical Expenses

1. Co-pays and Deductibles: Use your FSA for insurance co-pays and deductible expenses.
2. Doctor and Hospital Visits: Expenses related to visits to your doctor or hospital stay.
3. Prescription Medications: Most prescription medications can be covered.
4. Over-the-Counter Medications: Following the CARES Act of 2020, many over-the-counter medications are FSA-eligible without a prescription.

Vision Care

• Prescription Eyeglasses: Includes both frames and lenses.
• Contact Lenses and Solution: Costs associated with contact lenses and their maintenance.
• Eye Exams: Regular vision check-ups.

Dental Care

• Routine Cleanings and Check-ups: Regular visits to the dentist.
• Orthodontics: Braces and other orthodontic treatments.
• Fillings, Crowns, and Bridges: Treatments to repair damaged teeth.

Mental Health and Counseling

• Therapy Sessions: Costs associated with psychological therapy and counseling.
• Psychiatric Help: Visits to psychiatrists and prescriptions for mental health medications.

Medical Devices and Supplies

• Blood Pressure Monitors: Devices for monitoring your blood pressure at home.
• Crutches and Wheelchairs: Costs of purchasing or renting mobility aids.
• Diabetes Management Supplies: Glucose monitors, test strips, etc.

Alternative and Preventative Treatments

• Chiropractic Care: Visits to a chiropractor for therapeutic adjustment.
• Acupuncture: Treatments performed by a licensed professional.

Table: Common FSA-Eligible Expenses

Maximizing Your FSA

Planning Contributions

• Estimate Annual Expenses: Review past medical expenses and anticipate future costs, such as upcoming procedures or regular medication renewals.
• Align with Family Needs: Consider family medical history and potential needs for dependents.

Manage Reimbursements

• Keep Receipts: Document all expenses with receipts and invoices for reimbursement claims.
• Submit Promptly: Timely submission of claims ensures smooth reimbursement processes.

Take Advantage of Employer Policies

• Grace Period: Some employers offer a grace period of up to 2.5 months beyond the end of the plan year to use your funds.
• Carryover Option: Some plans allow up to $570 to be carried over to the next year (for plans in 2022).

Common FSA Questions and Misconceptions

Can I use my FSA for cosmetic procedures?

FSAs generally do not cover elective cosmetic procedures as they are not considered medically necessary. However, medically necessary surgeries or treatments, reconstructive procedures following injury or disease, might qualify.

Are gym memberships or fitness programs covered?

Typically, general fitness expenses like gym memberships are not eligible. However, if prescribed by a doctor for a specific medical condition, they might be covered, but this typically requires thorough documentation.

What happens to unused funds at the end of the year?

Under the "Use-It-Or-Lose-It" rule, funds not used by the end of the plan year are forfeited unless your plan includes a grace period or carryover provision. It’s important to verify your employer's specific rules regarding these options.

Are insurance premiums FSA-eligible?

Insurance premiums are not generally reimbursable from an FSA. They are usually considered a separate, non-eligible expense.

Resources for FSA Participants

1. Internal Revenue Service (IRS): Official guidelines and updates on tax-related benefits.
2. Employers and HR Departments: Specific details about your plan’s rules and covered expenses.
3. FSA Store: An online platform that offers a wide range of FSA-eligible products.

Conclusion

Understanding what you can purchase with your FSA allows you to maximize your healthcare spending benefits. By anticipating your annual medical costs, keeping organized records, and understanding the intricate details of your employer's FSA plan, you can ensure that this tax-advantaged account works best for you. Remember to stay informed with up-to-date information, and don't hesitate to ask your HR representative for specific details about your plan. Explore our website for more resources, guides, and detailed articles to help make the most out of your healthcare benefits!