Can You Buy Allergy Medicine With an FSA?

A Flexible Spending Account (FSA) is an employer-sponsored benefit that allows individuals to set aside pre-tax money from their paycheck to cover qualified medical expenses. This arrangement offers a significant tax advantage, as the funds contributed are not subject to federal income tax, Social Security tax, or Medicare tax. FSAs provide a valuable opportunity to reduce taxable income while planning for healthcare costs.

Eligible Allergy Medicine Categories

Historically, over-the-counter (OTC) medications often required a doctor’s prescription to be FSA-eligible. However, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law in March 2020, significantly changed this rule. Effective January 1, 2020, most OTC allergy medicines can now be purchased with FSA funds without needing a prescription from a healthcare provider.

Examples of typically covered items are oral antihistamines, medicated nasal sprays, and eye drops specifically formulated for allergy symptoms. It is important to note that the medicine must be for a legitimate medical condition, such as allergies, and not for general health enhancement or cosmetic purposes.

Purchasing and Reimbursement Process

Using an FSA for eligible allergy medicine involves direct payment or reimbursement. Many FSA plans issue a debit card, which functions similarly to a regular credit card at the point of sale. This card can be used at pharmacies, grocery stores, and online retailers that accept FSA payments, with some systems automatically verifying the eligibility of the purchase.

If an FSA debit card is not used, or if a purchase is made out-of-pocket, individuals can submit a claim for reimbursement from their FSA funds. This process requires retaining detailed receipts that clearly show the item description, date of purchase, the amount paid, and the vendor’s name. This documentation is important for audits by the FSA administrator. Claims can typically be submitted through various methods, including online portals, mail, fax, or mobile applications provided by the FSA administrator.

Important Considerations for FSA Use

A core principle of FSAs is the “use-it-or-lose-it” rule, meaning any unspent funds typically must be used by the end of the plan year or they are forfeited. To mitigate this, employers may offer one of two options: a grace period or a carryover.

A grace period allows an additional 2.5 months after the plan year ends to incur and use FSA funds, extending the spending deadline. Alternatively, some plans permit a carryover of unused funds into the next plan year. For 2025, the IRS has set the maximum FSA carryover limit at $660. Employers can only offer either a grace period or a carryover, not both.

Maintaining thorough records, including all receipts and documentation, is always recommended, even when using an FSA debit card. This practice ensures compliance and provides proof of eligible expenses if ever requested. If an individual changes employment, spending deadlines for their FSA funds are typically tied to their termination date or the end of the plan year, whichever comes first. Additionally, some individuals may have Limited-Purpose FSAs, which generally restrict eligible expenses to dental and vision care, meaning general allergy medicines would not be covered under these specific types of accounts.