Is Lip Balm FSA Eligible?

A Flexible Spending Account (FSA) allows individuals to set aside pre-tax money from their paycheck for qualified medical expenses. These accounts are beneficial for managing healthcare costs while reducing taxable income. A frequent question arises regarding the eligibility of various healthcare products, including common items like lip balm, leading to confusion about eligibility.

General FSA Eligibility Guidelines

Eligible expenses for an FSA are primarily those for “medical care” as defined by the Internal Revenue Service (IRS). This definition includes amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, and for treatments affecting any structure or function of the body. The underlying principle is medical necessity, meaning the expense must be primarily for the alleviation or prevention of a physical or mental defect or illness.

Common examples of expenses that clearly meet these criteria include doctor’s office visits, prescription medications, dental work, and vision care, such as eye exams and eyeglasses.

Over-the-Counter Product Eligibility

Historically, many over-the-counter (OTC) medications and products required a doctor’s prescription for FSA reimbursement. This changed with the passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act permanently removed the prescription requirement for most OTC medications and products, making them directly eligible for FSA use. This legislative change broadened the scope of eligible expenses, providing greater flexibility for consumers.

Examples of common OTC items that now qualify include pain relievers, cold and flu medicines, various first-aid supplies like bandages, and menstrual care products.

Lip Balm Eligibility Specifics

Not all lip balm products qualify as an FSA-eligible expense. Lip balm used purely for cosmetic purposes, such as daily moisturization or enhancing appearance without addressing a specific medical condition, is generally not eligible. The primary intent of the product determines its eligibility.

However, lip balm can be eligible if it is specifically formulated to treat or prevent a medical condition. Medicated lip balm designed to alleviate symptoms of chapped lips, cold sores, or fever blisters often qualifies. These products typically contain active ingredients aimed at the treatment or mitigation of a specific ailment. Their function extends beyond basic cosmetic care to address a health concern.

Lip balm containing Sun Protection Factor (SPF) is also generally eligible for FSA reimbursement. Sunscreen products, including those in lip balms, are considered preventative medical care because they protect against sun damage and reduce the risk of skin cancer. The medical or preventative benefit is the distinguishing factor for eligibility.

Using Your FSA Funds

Utilizing FSA funds for eligible purchases typically involves one of two main methods. Many FSA plans provide a dedicated debit card, which functions similarly to a regular credit or debit card at the point of sale. This card can be used directly at pharmacies, grocery stores, and online FSA stores that carry eligible products. When using the card, it is important to ensure the merchant’s system can identify eligible items.

Alternatively, individuals can pay for eligible expenses out-of-pocket and then submit a claim for reimbursement from their FSA. This process requires retaining itemized receipts as proof of purchase, clearly detailing the product or service, date, and cost. A credit card statement alone is usually insufficient, as it does not provide the necessary itemized information for verification. Maintaining thorough documentation helps ensure smooth processing of claims and compliance with IRS regulations.