Does FSA Reimburse Sales Tax on Medical Expenses?

A Flexible Spending Account (FSA) offers a valuable way for individuals to save money on eligible healthcare expenses. This employer-sponsored benefit allows you to set aside pre-tax funds from your paycheck, which can then be used to cover various medical, dental, and vision costs. The primary purpose of an FSA is to help reduce your out-of-pocket healthcare spending by leveraging tax advantages. Understanding the specific expenses that qualify for reimbursement is important for maximizing the benefits of this account.

Understanding FSA Eligible Expenses

The Internal Revenue Service (IRS) establishes guidelines for what constitutes an eligible medical expense for FSA reimbursement. These are costs for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any part or function of the body. Common eligible expenses include medical co-payments, deductibles, and prescription medications. Dental care, such as cleanings, fillings, and orthodontia, along with vision care like eye exams, eyeglasses, and contact lenses, also typically qualify.

Certain over-the-counter (OTC) medical supplies and medicines are also eligible for reimbursement. A doctor’s prescription is no longer required for most OTC medications, including items like pain relievers, cold and flu remedies, and allergy medicines. Menstrual care products are now fully FSA-eligible. However, expenses for items considered beneficial to general health, such as general health supplements not for a specific medical condition, or cosmetic procedures, are generally not eligible.

Sales Tax and FSA Reimbursement

Sales tax incurred on eligible medical items and services is an eligible expense for Flexible Spending Accounts (FSAs). If you purchase an item qualified for FSA reimbursement and sales tax is applied, the sales tax amount can also be reimbursed from your FSA funds. This recognizes sales tax as a direct cost of acquiring the eligible medical product or service.

For example, if an eligible medical device costs $100 and the sales tax on that item is $7, the full $107 paid, including the sales tax, can be submitted for reimbursement from your FSA. Ensure the receipt clearly itemizes the sales tax amount to facilitate the reimbursement process.

Submitting Your FSA Claim

Submitting an FSA claim requires specific documentation to your plan administrator. The IRS requires all expenses be substantiated with itemized receipts, bills, statements, or an Explanation of Benefits (EOB) from an insurance company. This documentation must clearly show the date of service or purchase, a description of the product or service, the amount charged, and the provider or merchant’s name.

Most FSA plans offer several claim submission methods, including online portals, mobile applications, or traditional mail. When using an online portal or app, upload digital copies of your supporting documents. If submitting via mail, a completed claim form must accompany your itemized receipts. After submission, claims are processed within a few business days, with reimbursement issued via direct deposit or check.