FSA accounts cover medical expenses you pay out of pocket, but not everything that seems medical

A Flexible Spending Account (FSA) lets you set aside pre-tax money to pay for certain healthcare costs. You can use it for copays, deductibles, prescription drugs, and medical equipment your doctor says you need. You cannot use it for health insurance premiums, over-the-counter medicines without a prescription, or cosmetic procedures. The IRS publishes a list of what counts, and it is more restrictive than most people think.

The key rule: the expense must be for diagnosis, treatment, or prevention of disease, and it must be something your health insurance would normally cover if you had met your deductible. If your insurance would deny it, your FSA will too.

Key Takeaways

  • FSA money covers copays, coinsurance, deductibles, and prescription drugs, as well as medical equipment and supplies your doctor prescribes.
  • Over-the-counter medicines like ibuprofen and allergy pills do not count unless you have a doctor's prescription for them.
  • Cosmetic procedures, gym memberships, and general wellness products are not covered, even if they improve your health.
  • You must spend FSA money by the end of the plan year or lose it — there is no rollover, though some plans offer a grace period of up to 2.5 months.
  • You need to keep receipts and documentation to prove expenses were medical and may be able to access if your plan administrator asks.

What FSA money actually covers

FSA accounts pay for medical care you receive from a licensed provider. This includes doctor visits, dental work, vision care, mental health treatment, and physical therapy. It covers the cost of prescription medications, insulin, and other drugs your doctor prescribes. It also covers medical equipment: crutches, wheelchairs, hearing aids, blood pressure monitors, and glucose meters all count.

Supplies related to a medical condition are covered too. This means bandages, syringes, test strips, and incontinence products if prescribed. Dental work — fillings, crowns, orthodontia, root canals — all may have access to. So do glasses, contact lenses, and eye exams. If you need a doctor's note saying the item is medically necessary, keep it with your receipt.

Certain services count even though they are not doctor visits. Acupuncture, chiropractic care, and speech therapy all may have access to if a licensed provider delivers them. Fertility treatment, including in vitro fertilization, is covered. So is mental health counseling and psychiatric medication.

What FSA money does not cover

Over-the-counter medicines are the most common mistake. Aspirin, ibuprofen, acetaminophen, allergy pills, cold medicine, and antacids do not count — even if you would normally buy them at a pharmacy. The only exception is if your doctor writes a prescription for the specific medicine. A prescription for "ibuprofen 400mg" makes it may be able to access; buying ibuprofen off the shelf does not.

Cosmetic procedures are never covered, even if they have a medical side effect. Teeth whitening, Botox, hair removal, and weight loss surgery for appearance reasons do not may have access to. Vitamins and supplements are not covered unless prescribed by a doctor for a specific deficiency. Sunscreen, toothpaste, and shampoo are not medical expenses. Gym memberships and fitness classes do not count, even if your doctor recommends exercise.

Health insurance premiums themselves cannot be paid with FSA money. Neither can long-term care insurance or disability insurance. Elective procedures — like cosmetic dentistry or LASIK surgery chosen for preference rather than medical need — are not covered. If you are unsure, ask your plan administrator before you spend the money.

How to know if something is may be able to access before you buy it

Your FSA plan administrator should give you a list of covered items when you enroll. Many employers post this list online or in the benefits portal. If you cannot find it, call the number on your FSA card or email the plan administrator directly — they can tell you in writing whether a specific item or service is covered.

When in doubt, ask for a prescription. If your doctor writes a prescription for an over-the-counter medicine or a medical device, it becomes FSA-may be able to access. This is especially useful for items like compression socks, back braces, or certain vitamins. The prescription does not have to be filled at a pharmacy — it just has to exist as documentation that the item is medically necessary.

Keep all receipts and documentation. If the plan administrator questions an expense later, you will need to show proof of what you bought and that it was medical in nature. Some receipts from pharmacies or medical suppliers are clear; others are not. A receipt that just says "pharmacy" without listing the item may not be enough.

What happens if you spend FSA money on ineligible items

If you submit a claim for something that is not covered, the plan administrator will deny it. You will have to pay for the item out of pocket with after-tax money. There is no penalty to you for submitting an ineligible claim — the worst outcome is that you do not get reimbursed.

If you intentionally submit false claims or misrepresent what you bought, that is fraud. It is rare for plans to pursue this, but it can happen. More commonly, if the plan administrator suspects a pattern of ineligible claims, they may audit your account and ask for documentation on past expenses. If you cannot prove the items were medical, you may have to repay the reimbursement.

The bigger risk is spending FSA money on ineligible items and then losing the money at the end of the year. FSA accounts operate on a "use it or lose it" rule. Money you do not spend by December 31 (or by the end of your plan year) is forfeited. Some plans offer a grace period of up to 2.5 months into the next year, but this varies by employer. Check your plan documents to see if yours does.

How much you can set aside in an FSA

The IRS sets an annual limit on how much you can contribute to an FSA. For 2024, the limit is $3,200 per person per year. This limit changes most years, so check with your plan administrator for the current year. You decide how much to contribute when you enroll, usually during your employer's open enrollment period.

The money comes out of your paycheck before taxes, which is the main advantage of an FSA. If you contribute $2,000 for the year and you are in the 22% tax bracket, you save about $440 in taxes. The tradeoff is that you must spend the money or lose it — there is no rollover to the next year (except for the grace period some plans offer).

If you have a major life change — marriage, divorce, birth of a child, loss of health insurance — you can change your FSA contribution outside of open enrollment. You have 30 to 60 days to make the change, depending on your plan. If you change jobs, your FSA ends and you cannot roll the money over to a new employer's plan.

Dependent care FSA versus medical FSA

Some employers offer two separate FSA accounts: one for medical expenses and one for dependent care. The dependent care FSA covers childcare, adult day care, and summer camp — but only the portion that allows you to work. It does not cover education or tuition. The limit for dependent care FSA is $5,000 per household per year (or $2,500 if you are married filing separately).

Medical FSA and dependent care FSA are separate accounts with separate limits and separate rules. Money in one cannot be moved to the other. If your employer offers both, you can contribute to both in the same year, but you need to track them separately and submit claims to the right account.

Frequently Asked Questions

Can I use my FSA card to buy over-the-counter medicine at the pharmacy?

Not unless you have a prescription. If you swipe your FSA card for an over-the-counter medicine without a prescription, the pharmacy may reject it or the plan administrator may deny the claim later. Some pharmacies are set up to block ineligible items automatically. If you want to use FSA money for over-the-counter medicine, ask your doctor for a prescription first.

What happens to money I do not spend by the end of the year?

You lose it. FSA accounts do not roll over to the next year. Some plans offer a grace period of up to 2.5 months into the next calendar year to spend the previous year's money, but this is optional and not all plans offer it. Check your plan documents or ask your employer whether yours does. If there is no grace period, you should spend or claim all FSA money by December 31.

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

Yes, as long as your spouse is claimed as a dependent on your tax return. You can use your FSA to pay for your spouse's copays, prescriptions, and medical equipment. You cannot use it for your spouse's health insurance premiums. Keep receipts in your spouse's name to document the expense if the plan administrator asks.

Do I need a prescription for medical equipment like a back brace or compression socks?

It depends on the item and your plan. Some medical equipment is automatically considered may be able to access; other items require a prescription or a letter from your doctor stating medical necessity. Call your plan administrator before you buy to confirm whether the specific item needs a prescription. If it does, ask your doctor for one — it takes a few minutes and makes the purchase may be able to access.

Can I use FSA money for dental work or vision care?

Yes. Dental work — cleanings, fillings, crowns, root canals, and orthodontia — all count. Vision care including eye exams, glasses, and contact lenses is covered. You can use FSA money to pay the dentist or eye doctor directly, or you can pay out of pocket and submit a claim for reimbursement. Keep your receipts either way.