FSA money can only be spent on specific medical and dependent care expenses, and you must keep receipts to prove what you bought

Your FSA account holds pre-tax dollars, but you cannot spend them on anything you want. The IRS has a strict list of what counts as an may be able to access expense, and your FSA plan administrator will reject claims that fall outside it. The most common may be able to access purchases are copays, deductibles, prescription medications, and dental and vision care. Dependent care FSAs have a separate list that covers daycare, preschool, and after-school programs.

You spend FSA money in two ways: you can pay out of pocket and then submit a claim for reimbursement, or you can use an FSA debit card that your plan provides. Either way, you need to keep the receipt or itemized statement showing what you bought and how much it cost. The plan administrator may ask for proof before they reimburse you, and if you cannot provide it, you lose that money.

Key Takeaways

  • FSA money covers copays, deductibles, prescription drugs, dental work, vision care, and medical equipment like crutches or blood pressure monitors, but not over-the-counter medications without a prescription.
  • Dependent care FSAs pay for daycare, preschool, after-school programs, and summer camps, but not for school tuition or activities like sports or music lessons.
  • You must keep receipts and itemized statements for every purchase, because the plan administrator can ask for proof before they reimburse you.
  • FSA debit cards are convenient but still require documentation; paying out of pocket and submitting a claim gives you more control over the paper trail.
  • Money left in your FSA at the end of the year is forfeited, so you need to estimate carefully how much you will actually spend.

Medical expenses that your FSA will cover

Your medical FSA covers most out-of-pocket costs related to diagnosis, treatment, and prevention of illness or injury. This includes copays and coinsurance when you see a doctor, dentist, or eye doctor. It covers the full cost of prescription medications and insulin. It covers deductibles you have to pay before your insurance kicks in, and it covers medical equipment like crutches, wheelchairs, hearing aids, and blood pressure monitors.

Over-the-counter medications are only covered if you have a prescription from a doctor. Aspirin, cold medicine, allergy pills, and antacids do not count unless a doctor writes a prescription for them. Dental work including cleanings, fillings, root canals, and orthodontia all may have access to. Vision care including eye exams, glasses, contact lenses, and laser eye surgery all may have access to. Mental health treatment, physical therapy, and chiropractic care are covered if they are medically necessary.

Some expenses that feel medical do not may have access to. Cosmetic procedures, gym memberships, weight loss programs, and vitamins do not count. Sunscreen and toothpaste do not count. Maternity clothes do not count, but the actual cost of delivery and prenatal care does. If you are unsure whether something qualifies, ask your plan administrator before you spend the money, because you cannot get reimbursed for ineligible expenses.

Dependent care expenses your FSA will pay for

A dependent care FSA pays for childcare while you work, which includes daycare centers, in-home daycare providers, preschool, and after-school programs. It covers summer day camps and before-school care. The child must be under age 13 or be a dependent of any age who is physically or mentally unable to care for themselves. You can use dependent care FSA money for a spouse or parent if they live with you and you pay for their care so you can work.

Dependent care FSA money does not cover school tuition, even if the school provides childcare. It does not cover activities like sports, music lessons, or tutoring. It does not cover overnight camps or camps where the primary purpose is education or enrichment rather than care while you work. It does not cover babysitters or nannies unless they are caring for your child while you are at work, not for evenings out or vacations.

The provider must have a tax ID number or Social Security number, and you must report it to the IRS when you claim the expense. If you use a nanny or in-home provider, you are responsible for verifying that they are legally authorized to work in the United States. The plan administrator will not reimburse you if the provider information is incomplete or incorrect.

How to submit a claim for reimbursement

Most plan administrators let you submit claims through an online portal, mobile app, or by mail. You will need to provide the date of the expense, the name of the provider, the amount you paid, and what the money was for. You must attach a receipt or itemized statement that shows all of this information. A credit card statement alone is not enough; you need the actual receipt from the provider.

The plan administrator will review your claim and either approve it or ask for more information. If they approve it, the reimbursement usually arrives within one to two weeks. If they ask for more documentation, you have a set number of days to respond, usually 30 days. If you do not respond in time, your claim is denied and you lose that money.

Keep copies of everything you submit. If the plan administrator later audits your account or disputes a claim, you will need to prove that you actually spent the money on an may be able to access expense. Many people photograph receipts with their phone and store them in a folder, which makes it easy to find them later if you need them.

Using an FSA debit card

If your plan provides an FSA debit card, you can swipe it at the point of sale instead of paying out of pocket and waiting for reimbursement. This is faster and more convenient, but it does not change the rules about what you can buy. You can only use the card for may be able to access expenses, and you still need to keep receipts.

Some merchants, like pharmacies and doctors' offices, are set up to accept FSA debit cards and the transaction goes through immediately. Other merchants, like grocery stores, may decline the card because they sell both may be able to access and ineligible items. When the card is declined, you have to pay with a different payment method and then submit a claim for reimbursement.

The plan administrator may ask you to provide a receipt after you use the debit card, especially if the merchant category is ambiguous. For example, if you use the card at a drugstore, they might ask for a receipt to confirm you bought medicine and not shampoo or candy. If you cannot provide proof, they may take the money back out of your account. This is called a substantiation request, and it is common.

What happens to money you do not spend

FSA accounts operate under a "use it or lose it" rule. Any money left in your account at the end of the plan year is forfeited; you cannot carry it over to the next year or get it back as a refund. This is why estimating how much to contribute is important. If you contribute too much and do not spend it all, you lose the difference.

Some plans offer a grace period of up to two and a half months after the plan year ends, during which you can submit claims for expenses you incurred during the plan year. This gives you extra time to gather receipts and file claims. Other plans offer a carryover option that lets you roll up to $610 (the amount changes yearly) into the next year. Ask your plan administrator whether your plan has either of these options.

If you know you will not spend all your FSA money by the end of the year, you can use it on may be able to access expenses you were planning to pay for anyway. For example, you could buy glasses, get dental work done, or stock up on prescription medications. This is better than losing the money entirely.

Common mistakes that cost you money

The biggest mistake is not keeping receipts. If the plan administrator asks for proof and you cannot provide it, they will deny your claim and you lose the money. Take a photo of every receipt, even small ones, and store them in one place.

Another common mistake is buying ineligible items and expecting reimbursement. Over-the-counter medications without a prescription, cosmetic procedures, and gym memberships do not count, no matter how much they feel like health expenses. Check the plan's list of may be able to access expenses before you buy something.

A third mistake is not using your FSA money before the plan year ends. The use-it-or-lose-it rule is strict. If you have money left over in November or December, spend it on may be able to access expenses rather than letting it disappear.

Finally, do not assume your FSA covers something just because your health insurance does. FSA rules are different from insurance coverage rules. For example, some insurance plans cover certain over-the-counter medications, but FSA does not unless you have a prescription. Always check your FSA plan documents, not your insurance documents.

Frequently Asked Questions

Can I use my FSA debit card at any pharmacy or doctor's office?

Most pharmacies and doctor's offices accept FSA debit cards, but not all. Some smaller providers or those with older payment systems may not be set up for it. If the card is declined, pay with another method and submit a claim for reimbursement instead. Always keep the receipt either way.

What if I buy something I think is may be able to access and the plan denies my claim?

You can appeal the denial by submitting additional documentation or a letter explaining why you believe the expense is may be able to access. Contact your plan administrator to ask what the appeal process is. If the appeal is denied, you lose that money and cannot get it back.

Can I use my dependent care FSA for my child's school tuition?

No. Dependent care FSA covers childcare while you work, not education or tuition. If the school provides before-school or after-school care and you are paying specifically for that care, you may be able to use FSA for that portion, but not for tuition.

Do I need to report my FSA reimbursements on my taxes?

No. FSA reimbursements are not taxable income. You already paid taxes on the money when it went into your account, so you do not report it again. Your plan administrator will not send you a tax form for FSA reimbursements.

What if I change jobs or lose my job during the plan year?

You usually have 60 days to spend the money in your FSA account after you leave your job. After that, the account closes and any remaining balance is forfeited. Some plans let you continue coverage through COBRA, which means you can keep the FSA and continue using it, but you have to pay the full premium yourself.