Is Physical Therapy FSA Eligible?

Flexible Spending Accounts (FSAs) offer a valuable way to manage healthcare costs by allowing individuals to set aside pre-tax money for eligible medical expenses. Many people wonder if specific treatments, such as physical therapy, qualify for reimbursement through these accounts. This guide aims to clarify the eligibility of physical therapy expenses and provide practical information for using your FSA effectively.

Understanding Flexible Spending Accounts

A Flexible Spending Account is an employer-sponsored benefit that allows employees to contribute pre-tax funds from their salary to pay for qualified healthcare expenses. This means money is deducted from your paycheck before taxes, which can reduce your taxable income. FSAs typically operate on a “use-it-or-lose-it” rule, meaning any unspent funds at the end of the plan year are generally forfeited. However, employers may offer options to mitigate this, such as a grace period of up to 2.5 months to use the funds, or allowing a carryover of a limited amount of unused funds into the next plan year. An employer can offer either a grace period or a carryover, but not both.

General Eligibility for Medical Expenses

For an expense to be eligible for FSA reimbursement, it must meet the Internal Revenue Service (IRS) definition of “medical care.” This definition includes amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. Expenses that are merely beneficial to general health, like vitamins or a vacation, are not covered. Common examples of eligible expenses include doctor visits, prescription medications, vision care, and dental care.

Physical Therapy Eligibility Criteria

Physical therapy is generally considered an eligible expense for Flexible Spending Accounts. Its eligibility depends on it being medically necessary and prescribed or recommended by a qualified healthcare professional. This means the therapy must be for the treatment of a specific medical condition, injury, or disease. For instance, physical therapy for post-surgical rehabilitation, injury recovery, or chronic pain management would typically qualify. Conversely, physical therapy undertaken solely for general wellness, exercise, or preventative maintenance without a diagnosed medical need would usually not be eligible.

The IRS guidance on “medical care” emphasizes objective factors, such as a physician’s diagnosis of a medical condition and their recommendation of the treatment. Services like initial evaluations, ongoing therapy sessions, and certain related products, such as TENS machines or heat/cold packs, are often covered when part of a prescribed treatment plan. These criteria help distinguish eligible therapeutic interventions from non-medical health activities.

Using Your FSA for Physical Therapy

When using your FSA for physical therapy, there are two primary methods: direct payment with an FSA debit card, if available, or paying out-of-pocket and then submitting a claim for reimbursement. For reimbursement, detailed documentation is typically required by your FSA administrator. This documentation should include an itemized receipt from the physical therapy provider.

The itemized receipt should clearly state the patient’s name, the provider’s name, the date(s) of service, a detailed description of the service provided, and the cost. In some instances, a Letter of Medical Necessity (LOMN) from a healthcare provider may be required. This letter typically outlines the diagnosis, the need for the therapy, and the duration of the treatment. Maintaining thorough records is important for potential verification by your FSA administrator or for tax purposes.