Can I Use My FSA to Pay for Someone Else?

A Flexible Spending Account (FSA) is an employer-sponsored benefit that allows individuals to set aside pre-tax money from their salary to pay for qualified out-of-pocket healthcare expenses. This tax-advantaged account reduces taxable income, leading to potential savings on federal, state, and employment taxes. Funds contributed to an FSA are typically available on the first day of the plan year, even before the full amount has been deducted from paychecks.

A common rule associated with FSAs is the “use-it-or-lose-it” provision, which generally requires participants to spend their funds by the end of the plan year or forfeit the remaining balance. However, employers may offer a grace period of up to two and a half months after the plan year ends, allowing additional time to incur and claim expenses. Alternatively, some plans permit a carryover of a limited amount of unused funds into the next plan year, with the maximum carryover for 2025 set at $660. For 2025, the annual contribution limit for healthcare FSAs is $3,300, though employers can set a lower limit.

Who Qualifies as a Dependent for FSA Purposes

When considering the use of FSA funds for another individual, Internal Revenue Service (IRS) guidelines for dependents apply, even if that person is not claimed as a dependent on the taxpayer’s federal income tax return. The primary categories are a qualifying child or a qualifying relative.

A qualifying child must meet several criteria: a relationship test, an age test, a residency test, and a support test. The relationship test includes:
A child
Stepchild
Foster child
Sibling
Stepsibling
Half-sibling
A descendant of any of them
For the age test, the individual must be under 19 at the end of the tax year, or under 24 if a full-time student, or any age if permanently and totally disabled. The residency test requires the child to have lived with the FSA holder for more than half of the year. The support test dictates the child must not have provided over half of their own support.

For an individual to be considered a qualifying relative, they must satisfy different conditions. They must not be a qualifying child of any taxpayer. They must also meet either a member of household test, residing with the FSA holder all year, or a relationship test, being related in one of the specific ways defined by the IRS. A gross income test requires their gross income to be below a certain threshold, which is $5,050 for 2025. The support test mandates the FSA holder must provide over half of the individual’s total support.

Eligible Expenses for Dependents

Once an individual is determined to be a qualifying dependent, FSA funds can be used for a wide range of eligible medical, dental, and vision expenses incurred by them. These expenses must be for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for treatments affecting any structure or function of the body. Common medical expenses covered include doctor visits, hospital stays, and prescription medications. Co-pays and deductibles, which are out-of-pocket costs, are also eligible for reimbursement through an FSA.

Dental care expenses for qualifying dependents are also covered, such as routine cleanings, fillings, and more complex procedures like braces or dentures. Vision care is another eligible category, encompassing eye exams, prescription glasses, contact lenses, and contact lens solutions.

Beyond these categories, FSAs can cover various other healthcare products and services. Over-the-counter (OTC) medications are eligible for reimbursement without a prescription. Menstrual care products are also eligible expenses. Diagnostic devices, such as blood pressure monitors, and medical equipment like crutches or wheelchairs, are also considered eligible. The IRS provides guidance on qualified medical expenses; consult these resources to confirm eligibility.

Substantiating Dependent Expenses

Proper documentation is important when seeking reimbursement from an FSA for expenses incurred by a qualifying dependent. The FSA administrator requires documentation to verify the expense is legitimate and eligible. This documentation typically includes itemized receipts from the service provider, such as a doctor’s office, pharmacy, dentist, or optician.

Each receipt must clearly present specific details:
The date the service was provided or the item was purchased
A clear description of the service or item
The name of the service provider or merchant
The exact amount charged
For dependent expenses, documentation must explicitly link the expense to the qualifying individual, such as the dependent’s name on a prescription label or medical bill.

Maintaining thorough records of all FSA reimbursements is important. These records should be retained for potential review or audit by the FSA administrator or the IRS. Organized documentation ensures compliance and facilitates a smooth reimbursement process.