FSA money covers medical expenses your insurance doesn't fully pay for

A Flexible Spending Account (FSA) is a tax-advantaged account your employer offers that lets you set aside pre-tax dollars for out-of-pocket medical costs. The money you put in reduces your taxable income, which means you pay less in federal income tax and Social Security tax on that amount. You can use FSA funds to pay for may have access to medical expenses — but not all medical expenses, and not for anything else.

The IRS maintains a strict list of what counts as a may have access to medical expense. If an expense isn't on that list, you cannot use FSA money for it, even if it seems medical in nature. The rules are specific enough that some items surprise people: certain over-the-counter medications are covered, others are not; some dental work qualifies, some does not.

Your employer sets up the FSA through a plan administrator (often a company like WageWorks, HealthEquity, or Conduent). When you incur a may have access to expense, you either pay out of pocket and submit a receipt for reimbursement, or you use a debit card linked to the account if your plan offers one. Either way, the money comes from your FSA balance, not your personal bank account.

Key Takeaways

  • FSA funds cover copays, coinsurance, deductibles, and other out-of-pocket costs for medical, dental, and vision care — but only if your insurance plan requires you to pay them.
  • Over-the-counter medications like pain relievers and allergy pills are covered only if you have a prescription or doctor's note; the same product without a prescription is not covered.
  • Expenses for cosmetic procedures, gym memberships, and general wellness products are never covered, even if they relate to your health.
  • You must submit receipts and proof of the expense to your plan administrator within a set timeframe, usually 60 to 90 days after the expense occurs.
  • FSA money does not roll over to the next year — you forfeit any balance remaining on December 31, so you must estimate carefully how much to contribute.

Medical, dental, and vision expenses that FSA covers

FSA funds pay for copays and coinsurance when you visit a doctor, dentist, or eye doctor. If your health insurance plan requires you to pay a portion of the cost, your FSA can cover that portion. This includes urgent care visits, emergency room visits, and specialist appointments.

Deductibles are also covered. If your insurance plan has a $1,500 deductible and you pay $1,500 out of pocket before your insurance kicks in, you can use FSA money to pay that $1,500. The same applies to coinsurance — if your plan requires you to pay 20% of a procedure's cost after the deductible, FSA funds cover your 20% share.

Dental work covered by your dental insurance plan can be paid with FSA money, including cleanings, fillings, root canals, and crowns. Orthodontia (braces) is also covered. However, cosmetic dental work — like teeth whitening or veneers done purely for appearance — is not covered.

Vision care includes eye exams, glasses, contact lenses, and contact lens solution. If you need corrective surgery like LASIK, that expense is covered too. Sunglasses are not covered, even if they have a prescription lens.

Over-the-counter medications and supplies with and without prescriptions

The rules for over-the-counter (OTC) medications changed in 2020. Now, most OTC medications require a prescription or a doctor's note to be covered by FSA funds. This includes pain relievers like ibuprofen and acetaminophen, allergy medications, cold medicines, and antacids.

If your doctor writes a prescription for an OTC medication — or provides a written statement saying you need it — you can use FSA money to buy it. The prescription does not have to come from a pharmacy; a note from your doctor saying "Patient should take ibuprofen 400mg twice daily" is enough. Keep that note with your receipt when you submit for reimbursement.

Medical supplies do not require a prescription. FSA funds cover bandages, gauze, elastic bandages, heating pads, ice packs, crutches, and blood pressure monitors. Feminine hygiene products (pads and tampons) are covered without a prescription. Thermometers, pulse oximeters, and other diagnostic devices are covered. Sunscreen is not covered, even though it prevents skin damage.

Insulin and other diabetes management supplies are covered without a prescription. Diabetic test strips, lancets, and glucose monitors all may have access to. Prescription inhalers for asthma are covered. Prescription topical creams for skin conditions are covered.

Expenses FSA does not cover

Cosmetic procedures and products are never covered, even if they improve your appearance in a way that affects your confidence or mental health. This includes cosmetic surgery, Botox, dermal fillers, teeth whitening, and hair removal treatments. The exception is if a procedure is medically necessary — for example, reconstructive surgery after an accident or burn — but the procedure must be for medical reasons, not appearance.

Gym memberships, fitness classes, and sports equipment are not covered, even if your doctor recommends exercise. Weight loss programs and diet supplements are not covered. Vitamins and nutritional supplements are not covered unless they are prescribed by a doctor for a specific medical condition (and even then, some plans exclude them).

General wellness products like essential oils, herbal remedies, and alternative medicine treatments are typically not covered. Acupuncture is sometimes covered if it is prescribed by a licensed medical doctor, but this varies by plan.

Expenses for dependents who are not covered under your health insurance plan cannot be paid with FSA funds. If your spouse or child is on a separate plan or uninsured, their medical expenses do not may have access to. However, if they are covered under your plan, their expenses do may have access to.

Childcare, eldercare, and dependent care are not covered by a medical FSA. (Your employer may offer a separate Dependent Care FSA for these expenses, which has its own rules and limits.)

How to submit expenses and get reimbursed

When you incur a may have access to expense, keep the receipt. Your plan administrator will ask for proof that the expense was medical in nature and that you paid it. A receipt from a pharmacy, doctor's office, or medical supply store is usually sufficient.

Log into your FSA account through your plan administrator's website or app. Most plans let you submit receipts online by taking a photo or uploading a file. Some plans still accept paper receipts mailed to an address provided in your plan documents.

Include the receipt, the date of service, the provider's name, and a description of what the expense was for. If the receipt does not clearly show that the item is medical (for example, if you bought bandages at a general store), include a note explaining what you bought and why it qualifies.

Your plan administrator typically has 30 to 60 days to review and approve your request. Once approved, the reimbursement is deposited into your bank account or mailed as a check. Some plans offer immediate reimbursement through a mobile app if you submit the receipt right away.

Keep copies of all receipts and reimbursement confirmations for your tax records. The IRS can audit FSA claims, and you need documentation to prove the expense was may have access to and that you paid it.

The "use it or lose it" rule and how much to contribute

FSA money does not roll over to the next calendar year. Any balance remaining in your account on December 31 is forfeited — you lose it. This is called the "use it or lose it" rule, and it is one of the biggest drawbacks of an FSA compared to an HSA.

Some employers offer a grace period of up to 2.5 months into the next year, which means you can submit claims for expenses incurred in the prior year until mid-March. Check your plan documents to see if your employer offers this. Even with a grace period, any balance still remaining after the grace period ends is forfeited.

Because of this rule, you should contribute only the amount you expect to spend on may have access to medical expenses in the coming year. If you contribute $2,500 but only spend $1,800, you lose $700. Estimate conservatively: include copays you know you will have, regular prescriptions, dental cleanings, and eye exams. Do not include expenses you might have or hope to avoid.

Your employer sets a contribution limit each year, which the IRS adjusts annually. For 2024, the limit is $3,200 per person. You can change your FSA contribution amount only during your employer's open enrollment period (usually in the fall) or if you have a may have access to life event like a marriage, birth, or change in insurance coverage.

FSA debit cards and what happens if you use one incorrectly

Many employers offer an FSA debit card that is linked directly to your account. When you use it at a pharmacy, doctor's office, or medical supply store, the charge is deducted from your FSA balance immediately. This is faster than paying out of pocket and submitting a receipt later.

However, FSA debit cards have strict rules. You can only use them at merchants that sell medical products or services. If you use the card at a general retailer like a grocery store or pharmacy that also sells non-medical items, the transaction may be declined or flagged for review. The plan administrator may ask you to provide a receipt proving that you bought only may have access to items.

If you use the card incorrectly — for example, buying groceries or toiletries — the plan administrator can demand repayment. You would have to return the money to your FSA account. To avoid this, use the debit card only at pharmacies, doctor's offices, dental offices, and medical supply stores. For purchases at general retailers, pay out of pocket and submit a receipt for reimbursement instead.

Some plans require you to submit a receipt within a certain timeframe even if you used the debit card. Check your plan documents to see what documentation is required.

Frequently Asked Questions

Can I use FSA money to pay my health insurance premium?

No. FSA funds cannot be used to pay your health insurance premium, dental insurance premium, or vision insurance premium. However, if you have a Health Savings Account (HSA) instead of an FSA, HSA funds can be used to pay certain insurance premiums in specific situations, such as COBRA premiums or premiums while you are receiving unemployment benefits.

What if I have a receipt but it does not clearly show the expense was medical?

Write a note on the receipt or include a separate note explaining what you bought and why it qualifies as a medical expense. For example, if you bought bandages at a general store, write "Sterile bandages for wound care." Include your name, the date, and the amount. Submit the receipt and note together to your plan administrator.

Can I use FSA money for my spouse's medical expenses?

Yes, if your spouse is covered under your health insurance plan. FSA funds can be used for any dependent covered by your plan. If your spouse has their own separate insurance plan, their expenses do not may have access to for your FSA.

What happens to my FSA balance if I leave my job?

You forfeit any remaining balance in your FSA when you leave your job. You do not take the money with you. However, you may be able to continue coverage under COBRA (Consolidated Omnibus Budget Reconciliation Act) if your employer offers it, which would let you use the remaining balance through the end of the plan year. Check with your employer's benefits department about COBRA may be able to access.

Can I use FSA money for mental health or therapy?

Yes. Copays and coinsurance for therapy, counseling, and psychiatric care are covered by FSA funds. Prescription medications for mental health conditions are also covered. However, wellness programs or self-help books are not covered unless they are prescribed as part of a treatment plan by a licensed mental health professional.