How to Spend FSA Money Fast Before It Expires

A Flexible Spending Account (FSA) is an employer-sponsored benefit allowing individuals to set aside pre-tax money for eligible healthcare expenses. This tax-advantaged account reduces taxable income, as contributions are exempt from federal income, Social Security, and Medicare taxes. A common feature of FSAs is the “use-it-or-lose-it” rule, where unspent funds are typically forfeited at the end of the plan year. Some employers may offer a grace period of up to 2.5 months to use funds from the prior year, or allow a limited amount, such as up to $660 for 2025, to roll over into the next plan year.

Eligible Medical Expenses

Flexible Spending Accounts cover medical, dental, and vision expenses for the account holder, their spouse, and qualified dependents. The Internal Revenue Service (IRS) defines these eligible expenses, and employers provide a comprehensive list. Covered services include doctor’s visits, copays, deductibles, and hospital services. Dental care such as routine cleanings, fillings, crowns, and orthodontics are eligible, as are vision services like eye exams, prescription glasses, contact lenses, and corrective eye surgery.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in March 2020, expanded the list of eligible items. This legislation removed the requirement for a physician’s prescription for many over-the-counter (OTC) medications and products. Common OTC items now eligible include pain relievers, cold and flu remedies, allergy medications, antacids, and antibiotic ointments. Feminine hygiene products, such as tampons and pads, became eligible without a prescription.

Other eligible items include health-related products and services like first-aid supplies, bandages, thermometers, blood pressure monitors, and diagnostic kits such as COVID tests. Specialized items like breast pumps and accessories, crutches, and orthopedic supports are covered. Items for general health or cosmetic purposes, and dietary supplements, are not eligible.

Where to Purchase Eligible Items

FSA funds can be used at various in-person and online locations. Many major pharmacies, such as Walgreens, and general retailers, including Amazon, have systems to identify and process FSA-eligible items directly. These merchants often utilize an Inventory Information Approval System (IIAS), which automatically identifies eligible products at the point of sale.

Specialized online stores, such as FSA Store and HealthEquity, exclusively sell FSA-eligible products. These retailers allow for seamless transactions using an FSA debit card. For medical services, FSA debit cards can be used at healthcare providers like doctors’ offices, dentists, and optometrists to cover copays, deductibles, or approved treatments.

While an FSA debit card offers convenience, it may not be accepted everywhere. In such cases, individuals can pay out-of-pocket and submit a claim for reimbursement. This method requires retaining detailed receipts and submitting them to the FSA administrator.

Strategies for Maximizing Your Funds

To utilize remaining FSA funds before the deadline, check your balance and understand the plan year-end date, including any grace period or rollover allowance. This information is available through your FSA administrator’s online portal or mobile app. Planning for upcoming medical needs is a proactive approach. Scheduling routine appointments, such as dental check-ups, eye exams, or physical therapy sessions, before the deadline can help deplete the account.

Consider larger, one-time eligible purchases. This could include new prescription eyeglasses or contact lenses, hearing aids, or specialized medical equipment like a blood pressure monitor or a nebulizer. Stocking up on frequently used eligible items is a practical strategy. Products like contact lens solution, bandages, pain relievers, allergy medication, and sunscreen are consumed regularly and have a reasonable shelf life.

Reviewing past medical expenses for which reimbursement has not yet been sought can uncover opportunities. Many plans allow a period to submit claims for expenses incurred during the plan year. Planning ahead for these purchases and services ensures that funds are fully utilized rather than forfeited.

Documentation and Reimbursement

Maintaining records of all FSA-eligible purchases and services is necessary, as substantiation may be required by the plan administrator or the IRS. All claims for reimbursement must be substantiated by third-party information. This documentation should clearly describe the service or product, the date it was provided or purchased, and the exact amount of the expense.

For purchases made with an FSA debit card, some transactions may be automatically substantiated by the merchant’s system. If a transaction cannot be auto-substantiated, the FSA administrator will request additional documentation. Acceptable forms of documentation include itemized receipts, Explanation of Benefits (EOB) statements from an insurance company, or detailed statements from healthcare providers. These documents must include the patient’s name, provider’s name, date of service, description of service, and the cost.

If an FSA debit card was not used, a claim form must be completed and submitted along with the supporting documentation. Most administrators offer online portals for claim submission. Prompt submission of claims is advisable to ensure timely processing and reimbursement.