Can You Use an FSA for Veterinary Bills?

Using a Flexible Spending Account (FSA) to manage healthcare costs is a common strategy for many individuals and families. These tax-advantaged accounts offer a way to pay for eligible medical expenses with pre-tax dollars, potentially leading to significant savings. A frequent question arises, however, regarding the scope of these accounts: can an FSA be used for veterinary bills?

Understanding Flexible Spending Accounts

A Flexible Spending Account (FSA) is an employer-sponsored benefit that allows employees to set aside a portion of their pre-tax salary to pay for qualified medical expenses. This arrangement helps reduce an individual’s taxable income, as contributions are deducted from payroll before federal income, Social Security, and Medicare taxes are calculated. FSAs are designed to help participants save money on out-of-pocket healthcare costs for themselves and their eligible family members.

A defining characteristic of FSAs is the “use-it-or-lose-it” rule, which generally requires that funds accumulated in the account be spent by the end of the plan year or they are forfeited to the employer. To mitigate this, employers may offer specific exceptions. These options include a grace period, which allows an extended period of up to two and a half months after the plan year ends to incur new eligible expenses, or a carryover, permitting a limited amount of unused funds to roll over into the next plan year. For instance, for plan years ending in 2025, up to $660 may be carried over, while for 2024, the amount was up to $640. Employers can choose to offer either a grace period or a carryover, but not both, or neither.

Defining Eligible Medical Expenses

The Internal Revenue Service (IRS) strictly defines what constitutes an “eligible medical expense” for FSA reimbursement purposes. According to IRS Publication 502, medical expenses are the 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. These expenses must primarily be for the prevention or alleviation of a physical or mental defect or illness. Expenses incurred merely for general health benefits, such as vitamins or vacations, are generally not included.

These eligible expenses cover medical care for the account holder, their spouse, and any qualified dependents. Common examples include fees for doctor visits, prescription medications, and dental and vision care, such as eyeglasses and contact lenses. Since the passage of the CARES Act, many over-the-counter medicines and health products are also eligible for reimbursement without requiring a doctor’s prescription. It is important to note that the IRS’s definition of “medical care” is specifically focused on human health.

Application to Veterinary Care

Under current IRS regulations, general veterinary care and routine pet-related expenses are not considered eligible medical expenses for Flexible Spending Account (FSA) reimbursement. This is because the IRS’s definition of “medical care” is explicitly tied to human health, covering treatments and services for the account holder, their spouse, or qualified dependents. Therefore, typical costs associated with pet ownership, such as check-ups, vaccinations, or medications for a family pet, cannot be paid with FSA funds.

There is a very specific and limited exception to this general rule: expenses related to a service animal. The costs of acquiring, training, and maintaining a service animal may be eligible for FSA reimbursement if the animal is medically necessary for an individual with a physical or mental disability. This can include expenses like food, grooming, and veterinary care for the service animal, provided these costs are incurred to enable the animal to perform its duties related to the individual’s medical condition. To qualify, a Letter of Medical Necessity (LMN) from a licensed healthcare professional is typically required, documenting the medical need for the service animal. This exception does not extend to emotional support animals unless they meet the strict criteria and training requirements of a service animal and are supported by an LMN.

It is worth noting that while current law restricts the use of FSAs for general pet care, there have been legislative efforts to change this. For instance, the proposed People and Animals Well-being (PAW) Act (H.R. 9508) aims to amend IRS regulations to allow limited use of FSAs for veterinary care or pet health insurance. However, as of now, this remains proposed legislation and is not current law. Therefore, for the vast majority of pet owners, veterinary bills for their beloved companions remain outside the scope of FSA eligibility.