What Can You Spend FSA Money On?

Flexible Spending Accounts (FSAs) offer employees a valuable way to save money on eligible healthcare expenses using pre-tax dollars. Understanding what expenses qualify for FSA spending is essential in maximizing the benefit of these savings accounts. In this guide, we'll explore the various categories of eligible expenses, highlight common misconceptions, and provide practical examples to help you make the most of your FSA dollars.

Understanding FSA Eligibility

An FSA is designed to cover a wide range of healthcare-related expenses, but it's essential to understand the specific categories that the IRS deems eligible. These expenses generally fall under healthcare, dental, vision, and dependent care. By planning ahead and knowing what you can purchase with your FSA, you can ensure that you take full advantage of this tax-advantaged account.

Eligible Healthcare Expenses

Medical Services and Procedures

FSA funds can be used for everyday medical services and procedures, making them incredibly versatile:

• Doctor Visits: Co-pays for routine visits as well as specialist consultations.
• Surgery: Both elective and necessary surgical procedures, with exclusions for purely cosmetic operations.
• Hospital Services: Inpatient and outpatient treatment, including associated fees.

Prescription Medications

Eligible prescription medications allow FSA holders to save significantly on their healthcare costs:

• Insulin: Without a prescription requirement.
• Prescription Drugs: Must be necessary for medical treatment and prescribed by a healthcare provider.

Over-the-Counter Medications and Products

Recent changes have expanded FSA eligibility to include certain over-the-counter medications and products:

• Fever Reducers and Pain Relievers: Includes common options like acetaminophen and ibuprofen.
• Allergy Medication: Both seasonal and year-round allergy treatments are covered.
• Cold and Flu Medications: Cough syrups, decongestants, and even nasal sprays.

Medical Equipment and Supplies

FSAs cover a broad spectrum of medical supplies and equipment necessary for health management:

• Blood Sugar Testing Kits: Including glucose meters and strips.
• Crutches, Walkers, and Wheelchairs: For mobility assistance post-injury or in chronic conditions.
• Bandages and First Aid Kits: Everyday health items readily eligible for FSA funds.

Dental and Vision Expenses

Dental Care

Proper dental care can be costly. An FSA helps mitigate these expenses:

• Routine Cleanings and Exams: Twice-a-year appointments can be paid tax-free.
• Cavity Treatments and Fillings: Essential dental work is covered.
• Orthodontics: Payments towards braces, retainers, and necessary aligners qualify.

Vision Care

Vision needs are another significant area where FSA funds can be applied:

• Eye Exams: Regular vision exams are essential and eligible.
• Prescription Eyewear and Sunglasses: Necessary items such as glasses, contact lenses, and their associated care solutions.
• Corrective Eye Surgery: Procedures like LASIK that improve vision.

Dependent Care FSA (DCFSA)

In addition to health-related FSAs, some employers offer Dependent Care FSAs:

• Childcare Services: Daycare, after-school programs, and nanny services.
• Elder Care: Adult daycare for older dependents with specific care needs.
• Preschool and Early Education: Costs for education programs that also provide care.

Common Misconceptions and FAQs

Are gym memberships eligible?

No, general wellness and fitness expenses such as gym fees, fitness classes, and nutritional supplements do not qualify.

Can I use FSA for cosmetic procedures?

Cosmetic procedures, including cosmetic surgery, teeth whitening, and other purely aesthetic treatments, are not eligible.

What happens to unused FSA funds?

Typically, any unspent funds at the end of the plan year are forfeited. However, some plans offer a grace period or allow for a small carryover.

Are insurance premiums covered by FSA?

No, insurance premiums are generally not eligible for coverage under FSA funds.

Tips for Maximizing FSA Usage

Plan Your Contributions

Carefully estimate your annual healthcare expenses and contribute accordingly to avoid losing unused funds at the end of the year.

Keep Detailed Records

Maintain receipts and documentation for all FSA expenditures to facilitate reimbursement processes and in case of IRS audits.

Utilize Employer Tools

Employers often provide tools or dashboards for tracking FSA spending—use these resources to monitor your balance and spending.

Consult the IRS List

Refer to the IRS guidelines or your employer's FSA plan documents for a comprehensive list of eligible expenses, as regulations may change.

To summarize, FSAs provide a tax-efficient way to cover a wide array of health-related expenses, helping to reduce the burden of out-of-pocket costs. By understanding what is eligible and planning your healthcare purchases accordingly, you can maximize the benefits offered by your FSA. To explore this topic further and stay updated on any changes to FSA regulations, consider discussing with a financial advisor or checking in with your HR department for personal assistance.