Can You Use an FSA for Cosmetic Procedures?

A Flexible Spending Account (FSA) allows individuals to set aside pre-tax money from their paycheck for eligible healthcare expenses. This reduces taxable income, offering a valuable tax advantage. While FSAs offer financial benefits, they typically operate under a “use-it-or-lose-it” rule, meaning unspent funds are generally forfeited at year-end. However, employers may offer a grace period of up to two and a half months or allow a limited carryover of unspent funds, such as up to $660 for the 2025 plan year.

General Rules for FSA Expenses

The Internal Revenue Service (IRS) defines what constitutes an eligible medical expense for FSA reimbursement. IRS Publication 502 defines medical expenses as amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or to affect any body structure or function. These expenses must primarily serve a medical purpose rather than simply promoting general health or benefiting one’s appearance.

Commonly covered expenses include a wide range of services and products that meet this IRS definition. Examples are doctor co-pays, prescription medications, dental treatments like fillings and orthodontia, and vision care such as eye exams and eyeglasses. Deductibles and co-insurance amounts under a health plan are also eligible for reimbursement through an FSA. Expenses must not be reimbursed by insurance or other sources to be eligible for FSA reimbursement.

Determining Eligibility for Cosmetic Procedures

Cosmetic procedures do not qualify as eligible FSA expenses if their sole purpose is to improve appearance. The IRS states that cosmetic surgery expenses are not deductible medical expenses if the surgery improves appearance without promoting proper body function or treating illness. Procedures like elective facelifts, liposuction for aesthetic reasons, hair transplants, and teeth whitening fall into this ineligible category.

However, cosmetic procedures can be eligible for FSA reimbursement in specific exceptions. A procedure may qualify if it is necessary to correct a deformity from a congenital abnormality, personal injury, or disfiguring disease. For example, reconstructive surgery following a mastectomy due to cancer, scar revision after an accident, or a procedure to correct a birth defect like a cleft lip or palate could be considered eligible. The factor is establishing the medical necessity of the procedure, demonstrating it goes beyond mere cosmetic enhancement.

Substantiating Your FSA Claim

Proving the medical necessity of a cosmetic procedure for FSA reimbursement requires specific documentation. The IRS requires detailed records to substantiate claims, especially for procedures that could be perceived as cosmetic. This involves obtaining a Letter of Medical Necessity (LMN) from a licensed medical practitioner, such as a doctor or surgeon.

The LMN must clearly state the medical diagnosis and explain how the procedure treats a specific disease, injury, or congenital abnormality. It should detail that the procedure is not solely for cosmetic purposes but is medically necessary to affect a structure or function of the body. In addition to the LMN, you will need detailed receipts from the service provider. These receipts should include the provider’s name, the date the service was provided, the patient’s name, a clear description of the service performed, and the dollar amount owed. Comprehensive and accurate documentation is important for ensuring your claim is processed smoothly and to avoid potential issues during an audit.