Can I Reimburse Myself From My FSA?

A Flexible Spending Account (FSA) allows individuals to set aside pre-tax money from their paycheck for eligible healthcare expenses. This arrangement helps reduce taxable income while providing a dedicated fund for out-of-pocket medical, dental, and vision costs.

Understanding Eligible FSA Expenses

Funds within an FSA are specifically designated for qualified medical expenses as defined by the Internal Revenue Service (IRS) in Publication 502. These expenses generally include amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.

Common eligible expenses include doctor visits, prescription medications, dental work, vision care, and various medical supplies. Copayments, deductibles, laboratory fees, and hospital bills also qualify. Since 2020, many over-the-counter medications and menstrual care products became eligible without a prescription.

Certain expenses are typically not eligible for FSA reimbursement. These often include cosmetic procedures unless they are medically necessary, general health supplements such as vitamins (unless prescribed to treat a specific medical condition), and employment-related physicals. Health insurance premiums are also generally excluded, though exceptions exist for certain long-term care insurance contracts.

The Reimbursement Claim Process

Account holders must gather appropriate documentation for each expense, such as itemized receipts or an Explanation of Benefits (EOB) from their insurance provider. These documents are essential for substantiating the expense.

Crucially, the documentation must contain specific details: the provider’s name, the date the service was received (not the payment date), the patient’s name, a clear description of the service or item purchased, and the total amount charged. Simple credit card receipts or balance forward statements are generally insufficient because they often lack the required itemized detail. For certain items, like specialized medical equipment or some over-the-counter products, a Letter of Medical Necessity from a physician or a prescription may be required to confirm eligibility.

Most FSA administrators offer convenient methods such as online portals, mobile applications, or traditional mail-in forms. To submit, an individual typically logs into their account, selects the option to reimburse themselves or pay a provider, enters the claim details, and then uploads or attaches the supporting documents.

After submission, the claim undergoes a review process. Reimbursements are typically processed within 2 to 5 business days, though some administrators may take slightly longer. Funds are commonly disbursed via direct deposit, which is the fastest method, or by check. The IRS mandates substantiation for every claim, meaning each expense must be individually documented and approved, rather than relying on sampling or thresholds.

Key Considerations for Reimbursement

A primary consideration is the “use-it-or-lose-it” rule, which stipulates that any funds remaining in an FSA at the end of the plan year are generally forfeited to the employer. This rule underscores the importance of carefully estimating annual healthcare expenses.

However, employers often provide options to mitigate the “use-it-or-lose-it” provision. One common option is a grace period, which allows account holders an additional 2.5 months after the plan year ends to incur new eligible expenses against the prior year’s funds. Alternatively, some employers offer a carryover (or rollover) option, permitting a portion of unused funds, such as up to $660 for plan years ending in 2025, to be rolled into the following plan year. Employers can choose to offer either a grace period or a carryover, but not both.

Beyond the spending deadlines, there are also claim submission deadlines, often referred to as a “run-out” period, which typically extend several months past the plan year or grace period. Proper substantiation is important, as incomplete or unclear documentation is a common reason for claim denial.

Changes in employment also have implications for FSA funds. Generally, any unused money in an FSA is forfeited to the employer upon job termination. However, under the uniform coverage rule, the full annual election amount is available from the first day of the plan year, meaning if an employee spends more than they have contributed before leaving, they are not typically required to repay the difference. In some cases, individuals may have the option to continue their FSA through COBRA, though contributions made under COBRA would be with after-tax money and may include administrative fees.