What is an FSA?
A doctor tells a patient, “We’ve run every test we can think of, and the results show … you’re out of money.”
You don’t want to miss out on important tests, and by using an FSA to pay for your share of the cost you can lessen the financial burden. What is an FSA, you ask? Keep reading, and I’ll tell you all about it!
Flexible Spending Account Basics
A Flexible Spending Account, or FSA, is a health benefits account to which employees set aside money from their pay before payroll tax calculations. With the tax savings they provide, FSAs are a popular option in employer-sponsored benefits packages. For 2024, employees can set aside up to $3,200.
FSA funds can pay for many IRS-approved healthcare services and products. Here is a list of everyday healthcare expenses and their eligibility status for full FSA accounts.
What services are eligible?
Many healthcare services are FSA-eligible, and here are some examples:
- Acupuncture
- Alcoholism and drug addiction treatment
- Ambulance services
- Annual physicals
- Body scan (electronic)
- Chiropractor
- Counseling therapy
- Dental treatments (most)
- Disabled dependent expenses for medical care
- Eye exams
- Eye surgery
- Fertility treatments
- Home for the Intellectually and Developmentally Disabled
- Hospital services (including meals and lodging)
- Laboratory fees (related to medical care)
- Lead-based paint removal
- Long-term care and services for seriously ill individuals
- Nursing home and services
- Organ transplants
- Physical therapy
- Psychiatric care
- Psychoanalysis
- Psychologist
- Programs that help stop smoking
- Special education
- Transportation costs for medical treatments and services
- Weight loss program (requires a special letter showing medical need)
- X-ray
What products are eligible?
Many healthcare products are also FSA-eligible. Again, here are some examples:
- Artificial teeth
- Bandages
- Birth control and contraception devices
- Braille reading material
- Breastfeeding supplies/expenses
- Capital expenses (home improvements that help a disabled person)
- Communication equipment for deaf/speech-impaired
- Contact lenses and eyeglasses
- Co-pays, co-insurance, and deductibles
- COVID-19 PPE (Hand sanitizers, wipes, and masks)
- Crutches (bought or rented)
- Diagnostic devices (blood sugar monitors, blood pressure monitors, etc.)
- Guide dogs or other service animals
- Hearing aids (batteries, repairs, and maintenance)
- Insulin and diabetic supplies
- Medical conference expenses (if related to personal chronic illness)
- Menstrual care products
- Over-the-counter (OTC) medications
- Oxygen and oxygen equipment
- Pregnancy test kits
- Prescription drugs and medicine
- Prosthesis (artificial limbs, breast reconstruction, etc.)
- Aids that help stop smoking (gums and patches)
- Wigs to conceal hair loss caused by a disease or medical treatment
- Vehicular expenses (for operational and design costs that help transport a disabled person)
- Wheelchairs
What expenses are not eligible?
While this is not an exhaustive list, some expenses that are not FSA-eligible include:
- Babysitting, childcare, or nursing care for a healthy baby
- Controlled substances that are illegal under federal law, like marijuana, laetrile, etc.
- Cosmetic surgery that does not fix/treat deformity or illness like a facelift, liposuction, etc.
- Dancing lessons
- Diaper services that do not manage the effects of a disease
- Electrolysis
- Funeral expenses
- Future medical care
- Hair transplant or removal
- Health club dues
- Household help
- Illegal operations and treatments
- Insurance premiums
- Maternity clothes
- Medicines and pharmaceuticals from another country
- Nutritional supplements
- Swimming lessons
- Teeth whitening
- Veterinary fees for animals not qualified as service or support
Is IRS Approval Required?
The IRS decides which products and services are eligible for purchase or payment using FSA funds. Guidance is available in IRS Publication 502, Medical and Dental Expenses.
Medical expenses include the costs of diagnosis, cure, mitigation, treatment, or prevention of disease and the costs for treatments affecting any part or function of the body. Services must be legal in the U.S. and provided by doctors, surgeons, dentists, and other medical providers. In addition, they include equipment costs, supplies, and diagnostic devices.
You can buy FSA-eligible products at pharmacies, grocery and department stores, and online stores such as FSAStore.com, Amazon, and Walmart.
Some Important Notes About FSA Usage
- Many FSA plans come with convenient debit cards, which reduce the need to file reimbursement claims.
- When participants pay for expenses with a debit card, they may need to submit receipts.
- FSA funds can pay for the expenses of employees and their tax dependents. Tax dependents do not have to be legally related, within a specific age range, or covered by the employee’s insurance policy. However, they have to meet specific rules defined by the IRS.
- The Uniform Coverage Rule provision lets employees access their entire FSA election on the first day of the plan year. Persons who “spend ahead” under the Uniform Coverage Rule will make equal and regular contributions to the account throughout the year until their contributions resolve the debt.
FSAs are a great way to save money and pay for the screenings and tests needed to help identify problems early to maximize your treatment and recovery or, conversely, to confirm your excellent health. I’m always here to help, so come back for answers to all your benefits questions!