Can You Use FSA for Diapers? What to Know

Flexible Spending Accounts (FSAs) allow employees to set aside pre-tax money from their paycheck for eligible healthcare expenses. This employer-sponsored benefit helps individuals reduce taxable income while managing qualified medical costs. FSA funds can be used for various health-related services and products.

Diaper Eligibility for FSA

Generally, diapers for infants and young children are not considered eligible expenses for Flexible Spending Accounts. The Internal Revenue Service (IRS) views standard infant diapers as items for general hygiene or personal care, rather than primarily for medical care, as incontinence is a normal developmental stage for babies. Therefore, they typically do not meet the criteria for FSA reimbursement.

However, diapers can be eligible if medically necessary due to a specific medical condition, such as incontinence from an illness, injury, or disability. In such cases, a Letter of Medical Necessity (LMN) from a healthcare provider is required. This letter must specify the diagnosed medical condition, explain how the diapers treat it, and indicate the duration needed. A new LMN may be required if treatment extends beyond the current plan year.

Understanding General FSA Eligibility

Flexible Spending Account funds are designated for “medical care” as defined by the IRS. This definition encompasses expenses incurred primarily for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any body structure or function.

Commonly eligible expenses include doctor visits, prescription medications, dental care, and vision care, such as glasses and contact lenses. Certain over-the-counter medications and supplies, like bandages or first-aid items, may also qualify. In contrast, items that are merely beneficial to general health or for cosmetic purposes, unless medically necessary, are typically not eligible.

Using Your FSA Funds

Accessing FSA funds typically involves two methods: using an FSA debit card at the point of purchase or submitting a claim for reimbursement. Debit card expenses are often approved automatically, but retaining receipts is advised. For reimbursement, submit a claim with documentation, such as receipts and an Explanation of Benefits, to your FSA administrator.

Maintaining detailed records for purchases is important, as these may be required for substantiation by the FSA administrator or IRS to verify eligibility. FSAs are subject to a “use-it-or-lose-it” rule, meaning unspent funds at the end of the plan year are typically forfeited. However, employers may offer a grace period (up to 2.5 months) to use remaining funds, or allow a limited amount to roll over to the next plan year. Employers can offer one of these options, but not both.