Can FSA Be Used for Cosmetic Surgery?

Flexible Spending Accounts (FSAs) offer a tax-advantaged method for individuals to manage and pay for various healthcare expenses. These employer-sponsored benefits allow participants to set aside pre-tax money from their wages into a dedicated account. This reduces taxable income, potentially leading to savings on federal, state, and Social Security taxes.

Understanding Flexible Spending Accounts

A Flexible Spending Account enables employees to contribute a portion of their pre-tax salary to cover qualified medical expenses. Funds are deducted from each paycheck before taxes.

A unique feature of FSAs is the “use-it-or-lose-it” rule, which generally mandates that funds remaining in the account at the end of the plan year are forfeited. Employers may offer exceptions, such as a grace period of up to two and a half months after the plan year ends. Alternatively, some plans permit a limited carryover of unused funds, up to $660 for 2025. Employers can only offer either a grace period or a carryover, but not both. The full annual contribution amount is often available for use at the beginning of the plan year, regardless of how much has been contributed so far.

General Rules for Qualifying Medical Expenses

For an expense to be eligible for reimbursement through an FSA, it must meet the Internal Revenue Service (IRS) definition of “medical care.” This includes amounts paid primarily for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any structure or function of the body. Expenses solely for general health improvement or cosmetic purposes without a medical reason are not eligible.

Common eligible expenses include co-payments, deductibles, and prescription medications. Dental care, such as cleanings, fillings, and orthodontia, along with vision care, including eye exams and eyeglasses, are also covered. Certain over-the-counter items, like bandages and pain relievers, can also be reimbursed.

Cosmetic Surgery and FSA Eligibility

In most circumstances, cosmetic surgery is not considered a qualifying medical expense for FSA reimbursement. The IRS generally defines non-eligible cosmetic surgery as any procedure directed at improving a patient’s appearance that does not meaningfully promote the proper function of the body or prevent or treat an illness or disease. The primary intent of the procedure, whether medical or solely aesthetic, is the determining factor for eligibility.

Procedures performed purely for aesthetic enhancement typically fall under this ineligible category. Examples often include elective facelifts, liposuction undertaken solely for appearance, and breast augmentation for cosmetic reasons. Hair transplants, electrolysis for hair removal, and teeth whitening are also usually not eligible expenses.

Medically Necessary Cosmetic Procedures

There are specific exceptions where cosmetic surgery can be an eligible FSA expense. These exceptions arise when the procedure is necessary to correct a deformity. This includes deformities resulting from a congenital abnormality, a personal injury stemming from an accident or trauma, or a disfiguring disease.

For instance, reconstructive surgery following a mastectomy due to breast cancer is generally considered medically necessary and eligible for FSA reimbursement. Similarly, procedures to repair a cleft palate or to correct disfigurement from severe burns or injuries are typically covered. Even certain procedures commonly perceived as cosmetic, such as Botox injections, may be eligible if used to treat a diagnosed medical condition like chronic migraines rather than for wrinkle reduction. In these cases, documentation from a healthcare provider, such as a Letter of Medical Necessity, is usually required to substantiate the medical necessity of the procedure.