What to Use Your FSA For: A List of Eligible Expenses

A Flexible Spending Account (FSA) allows individuals to set aside pre-tax money for eligible expenses. This tax-advantaged arrangement helps reduce an individual’s taxable income, offering a way to manage healthcare and dependent care costs more efficiently. The funds within an FSA are specifically designated for IRS-defined qualified expenses, covering necessary costs with tax-free dollars. Understanding eligible expense categories is important for maximizing FSA benefits.

Qualifying Medical Expenses

A Health Care FSA (HCFSA) covers expenses related to the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any structure or function of the body. This includes routine doctor visits, specialist consultations, and hospital stays. Services such as diagnostic tests, including X-rays and lab work, are also eligible.

Preventative care measures, like annual physical exams and various screenings, are covered. Mental health services, including therapy and counseling, are eligible. Additionally, alternative treatments such as chiropractic care and acupuncture are often included if they address a specific medical condition.

The HCFSA also extends to durable medical equipment (DME), which encompasses items like crutches, wheelchairs, and blood glucose monitors. These expenses must be for a medical purpose and not merely for general health improvement. General vitamins or health club memberships are not covered unless prescribed for a specific medical condition.

Qualifying Dental and Vision Expenses

Dental care expenses are eligible under an HCFSA, encompassing both routine and more extensive treatments. This includes regular check-ups, cleanings, and fluoride treatments. Procedures such as fillings, tooth extractions, and the cost of dentures are also covered.

Braces and other orthodontic treatments are eligible. Crowns, bridges, and dental implants used to restore damaged or missing teeth also qualify. Cosmetic procedures like teeth whitening are not eligible, as they do not address a medical condition.

Vision expenses are also an eligible category within an HCFSA. This includes eye exams. Prescription eyeglasses, including bifocals and progressive lenses, as well as contact lenses and their cleaning solutions, are covered.

Corrective eye surgeries, such as LASIK, are eligible when performed to treat a vision problem. Items like eye drops for allergies or dry eyes are also covered. Non-prescription items used for general eye comfort or fashion, like non-corrective blue-light glasses or sunglasses, are not eligible.

Qualifying Prescription and Over-the-Counter Items

Prescription medications are eligible under a Health Care FSA, covering a wide range of drugs prescribed by a licensed healthcare professional. This includes both brand-name and generic medications. Compounded medications can be eligible with appropriate documentation.

The CARES Act (2020) expanded the eligibility of over-the-counter (OTC) items. Many common OTC medications and products are now eligible without requiring a doctor’s prescription. This change simplifies the process for consumers.

Eligible OTC items include pain relievers like ibuprofen and acetaminophen, cold and flu medications, and allergy remedies. First-aid supplies such as bandages, antiseptic wipes, and thermometers are also covered. Menstrual care products, including tampons and pads, became eligible.

Qualifying Dependent Care Expenses

The Dependent Care Flexible Spending Account (DCFSA) is designed for expenses related to the care of qualifying dependents. This account helps individuals pay for care that allows them, and their spouse if married, to work or actively look for work. Qualifying dependents typically include children under the age of 13, or a spouse or other dependent who is physically or mentally unable to care for themselves and lives in the household.

Eligible DCFSA expenses include daycare, preschool, and nursery school programs. Before- and after-school care programs also qualify, providing supervision for children. Summer day camps are eligible, allowing parents to maintain employment during school breaks.

Nanny or au pair services can be eligible if they provide care for a qualifying dependent. Expenses that are primarily educational, such as kindergarten tuition or overnight camps, are not covered. Payments made to a child of the account holder under age 19, or to a spouse, are not eligible.

The Reimbursement Process

Obtaining FSA reimbursement requires proper substantiation of eligible expenses. The first step is to gather documentation when an eligible expense is incurred. This includes an itemized receipt, a provider billing statement, or an Explanation of Benefits (EOB) from an insurance carrier.

Key information required on documentation includes the date the service was received or the item was purchased, a clear description of the service or item, the dollar amount, and the name of the provider or merchant. Credit card receipts alone are often insufficient as they may lack detailed descriptions of the services or products.

Claims can be submitted through various methods, including online portals, mobile applications, fax, or mail. Many FSA plans offer a debit card linked to the account, which can be used at the point of sale for eligible expenses, potentially reducing the need for manual claim submission. Even with a debit card, retaining receipts is important as substantiation may still be requested by the plan administrator.

After submission, the FSA administrator reviews the claim to verify eligibility. Most claims are processed within a few business days. Reimbursement is then issued, typically through direct deposit to a bank account or via a check.