Can You Buy Food With an FSA Card?

A Flexible Spending Account (FSA) allows individuals to set aside pre-tax dollars for eligible medical expenses. While FSAs are primarily designed for traditional medical expenditures, certain food items can be purchased using these funds in specific, limited situations. This eligibility depends on strict Internal Revenue Service (IRS) guidelines, requiring food purchases to serve a direct medical purpose rather than general nutritional needs.

General Eligibility for Food Items

The Internal Revenue Service (IRS) outlines strict criteria for eligible medical expenses, including food items. Generally, groceries or food purchased for routine nutritional needs are not considered eligible expenses for FSA reimbursement. Food items become eligible only if they are “medically necessary” to treat a specific medical condition diagnosed by a healthcare professional. This means the food or beverage must not satisfy normal nutritional needs and must alleviate or treat an illness. The expense is limited to the amount by which the cost of the specialized food exceeds the cost of a comparable product that satisfies normal nutritional needs.

To establish medical necessity, a formal substantiation from a physician or other licensed healthcare provider is required, typically a prescription or a Letter of Medical Necessity (LMN). The IRS defines medical care as 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. Expenses that are merely beneficial to general health do not qualify for FSA reimbursement.

Specific Examples of Eligible Food Items

Certain food items may become eligible for FSA reimbursement with a medical diagnosis and substantiation. For individuals with diabetes, prescribed sugar-free products or foods for blood sugar management may qualify. Gluten-free foods are eligible for individuals diagnosed with celiac disease, where such foods are medically required to manage their condition. Eligibility hinges on the food being a direct treatment for the diagnosed condition, not just a dietary preference.

Allergy-specific foods, such as lactose-free or nut-free products, can also qualify when medically necessary. Specialized infant formulas prescribed for babies with specific medical disorders or allergies may also be covered. In these cases, only the cost difference between the specialized formula and routine baby formula may be reimbursed. Foods required for managing chronic conditions like Crohn’s disease, kidney disease, or phenylketonuria (PKU), which necessitate highly specific dietary restrictions, are also examples of potentially eligible items. Nutritional supplements may be eligible but often require a Letter of Medical Necessity.

How to Purchase Eligible Food Items

Purchasing eligible food items with an FSA card typically involves obtaining a Letter of Medical Necessity (LMN). This document, issued by a licensed healthcare provider, details the specific medical condition, explains why the food item is medically necessary for treatment, and may specify the duration of the need. The LMN should include the patient’s and physician’s information, the diagnosis, and a clear explanation of how the recommended food item treats or mitigates the medical condition. It serves as proof that the purchase is for medical care.

When using an FSA card at the point of sale, some merchants have an Inventory Information Approval System (IIAS) that can identify eligible items based on their product codes. However, not all stores utilize this system, especially for specialized food items, meaning manual substantiation may be required later. Even with an LMN, individuals remain responsible for ensuring that each food purchase strictly adheres to the “medically necessary” criteria. If the FSA card is declined, or if the purchase is made out-of-pocket, the individual will need to submit a claim for reimbursement along with the necessary documentation.

Documentation and Record-Keeping

Maintaining thorough records is important for all FSA transactions, especially for food purchases which often require additional substantiation. Key documents to retain include detailed, itemized receipts that clearly show the product name, date of purchase, and cost. It is also important to keep the original Letter of Medical Necessity and any physician’s prescriptions that support the medical necessity of the food items. These records are important for substantiation by the FSA administrator and in case of an IRS audit.

FSA administrators may request copies of these documents to verify expense eligibility. The IRS generally advises keeping tax records, including those supporting FSA expenses, for at least three years from the date the tax return was filed. Some recommendations suggest retaining medical expense records for up to seven years, particularly for FSA or Health Savings Account (HSA) related expenses, to cover potential audits. Proper record-keeping ensures compliance and can prevent issues with reimbursements or future tax inquiries.