Can You Buy Baby Formula With an FSA?

Flexible Spending Accounts (FSAs) offer a tax-advantaged way for individuals to pay for certain out-of-pocket healthcare costs. A common question arises regarding the eligibility of everyday expenses, such as baby formula, for reimbursement through these accounts. Understanding the specific Internal Revenue Service (IRS) guidelines is important for navigating what can and cannot be purchased with FSA funds. This overview clarifies general FSA eligibility rules and specific conditions for baby formula.

General Rules for FSA Eligible Expenses

The Internal Revenue Service (IRS) defines eligible medical expenses as costs incurred for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. This broad definition, outlined in IRS Publication 502, governs what can be reimbursed. Expenses must be primarily for medical care, not merely beneficial to general health. Common examples of eligible expenses include doctor visit co-payments, prescription medications, dental care, and eyeglasses.

Many over-the-counter (OTC) products became eligible without a prescription, but the core principle of medical necessity remains. The IRS establishes these rules, though specific plan administrators may have additional guidelines. Reviewing your plan’s Summary Plan Description is advisable.

Baby Formula Eligibility Requirements

Generally, baby formula is not considered an eligible expense for FSA reimbursement. The IRS views formula as a food product intended to meet the normal nutritional needs of a healthy child. This classification means it does not typically fall under the definition of a medical expense for treating a specific illness or condition.

However, there are specific, rare circumstances where specialized baby formula may qualify. If a child has a diagnosed medical condition, such as severe allergies, metabolic disorders, or digestive issues, that necessitates a particular type of formula, a portion of its cost might be eligible. In these cases, only the difference in cost between the specialized medically necessary formula and the cost of a regular, conventional formula may be reimbursed. IRS Revenue Ruling 55-261 specifies that special foods must be prescribed by a physician for a specific illness, be in addition to a normal diet, and not be part of normal nutritional needs. To substantiate such a claim, a Letter of Medical Necessity (LMN) from a healthcare provider is typically required, detailing the medical condition and explaining why the specific formula is medically necessary for treatment.

Submitting Claims and Required Documentation

When seeking reimbursement for eligible expenses, including specialized baby formula, proper documentation is essential. Most FSA plans offer various methods for submitting claims, such as using an FSA debit card at the point of sale, or submitting claims online, by fax, or via mail. While FSA debit cards can simplify purchases, some transactions may still require additional verification from the plan administrator.

For out-of-pocket purchases, you will need to submit a claim form along with supporting documentation. This documentation must include an itemized receipt detailing the date of service or purchase, a description of the item, the amount charged, and the provider or store name. If a Letter of Medical Necessity (LMN) was required for eligibility, such as for specialized baby formula, a copy of the LMN must accompany your claim. Additionally, for prescribed items, a pharmacy printout or prescription can serve as supporting evidence. It is important to retain all records, as the IRS may request them to verify the eligibility of expenses.