Are Diapers an FSA-Eligible Expense for Your Family?

Flexible Spending Accounts (FSAs) allow individuals and families to manage healthcare costs by setting aside pre-tax dollars. This article clarifies common questions about FSA eligibility for everyday items, especially those relevant to families and children.

Understanding Flexible Spending Accounts

A Flexible Spending Account (FSA) is an employer-sponsored benefit allowing employees to contribute a portion of their salary, pre-tax, to cover eligible healthcare or dependent care expenses. This pre-tax contribution reduces an individual’s taxable income, leading to tax savings. Employees decide their annual contribution amount, which is then deducted from their paychecks over the plan year.

A core principle of FSAs is the “use-it-or-lose-it” rule, where funds generally must be spent by the end of the plan year or they are forfeited. However, employers can offer options like a grace period (up to 2.5 months after the plan year to incur new expenses) or a limited carryover to mitigate this rule, though they cannot offer both. Eligible expenses for FSAs are defined by the Internal Revenue Service (IRS) under Internal Revenue Code (IRC) Section 213(d), which specifies “medical care” as amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any structure or function of the body.

Diapers and Eligibility Guidelines

Standard diapers for infants and toddlers are generally not considered eligible for reimbursement through a Flexible Spending Account. The IRS views these items as necessary for general hygiene or convenience, rather than for the diagnosis, cure, mitigation, treatment, or prevention of a specific medical condition. Incontinence in infants is considered a normal bodily function, not a medical issue requiring treatment.

There are rare exceptions where diapers might be eligible, typically requiring a Letter of Medical Necessity (LMN) from a healthcare professional. For instance, if a child has a specific medical condition, such as certain brain defects or severe skin conditions like eczema, that necessitates specialized diapers for treatment or mitigation, these might qualify. The LMN must detail the diagnosis, how the diapers alleviate the condition, and the duration of the treatment. Adult diapers, however, are often eligible because they are used to manage incontinence resulting from an underlying medical condition.

Other Eligible Expenses for Children

Many other common expenses related to children and dependents do qualify for FSA reimbursement because they align with the IRS definition of medical care. This includes basic medical supplies like fever thermometers, first-aid kits, and bandages.

Certain over-the-counter medications, which no longer require a prescription, are also eligible if used for a medical purpose. Breast pumps and supplies, which support a bodily function related to health, are consistently eligible for FSA funds. Additionally, co-pays for doctor’s visits, prescription medications, and even certain specialized car seats for children with specific medical conditions (with an LMN) can be covered.