FSA money covers medical expenses your insurance doesn't, but the IRS has a strict list of what qualifies
A Flexible Spending Account (FSA) lets you set aside pre-tax dollars to pay for medical, dental, and vision costs. The catch is that you can only spend that money on things the IRS considers medical expenses — not on anything health-related, but specifically on treatments, devices, and services that prevent or treat illness or injury. If you buy something that doesn't meet the IRS definition, you'll owe taxes on it plus a penalty.
The IRS publishes a list of what counts, and it's more detailed than most people expect. Some things you'd think would may have access to don't, and some things that sound like they shouldn't actually do. Understanding the rules before you spend keeps you from losing money to taxes and penalties.
Key Takeaways
- FSA money covers doctor visits, prescriptions, dental work, glasses, and hearing aids, but only if they treat or prevent a medical condition.
- Over-the-counter items like pain relievers, allergy medicine, and cold medicine now count as FSA expenses without a prescription, but only if you buy them after 2020.
- Cosmetic procedures, gym memberships, and general wellness products do not count, 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.
- Keep receipts for everything you buy with FSA money; the IRS can ask you to prove that expenses were medical.
Medical care and prescriptions that always count
Doctor visits, hospital stays, surgery, and prescription medications are straightforward FSA expenses. This includes copays, coinsurance, and deductibles you pay out of pocket. If your insurance requires you to pay part of the bill, FSA money covers your share.
Prescription drugs prescribed by a doctor count, including birth control pills, inhalers, and antibiotics. Over-the-counter medications now count too — but only if you buy them after January 1, 2020. This change came from the CARES Act, and it applies to pain relievers, allergy medicine, cold medicine, antacids, and similar items you can buy without a prescription. You do not need a doctor's note for over-the-counter drugs anymore.
Mental health treatment, including therapy and psychiatric visits, counts as a medical expense. So do vaccines, blood tests, X-rays, and diagnostic imaging. If a doctor orders it or prescribes it to treat or prevent a condition, FSA money can pay for it.
Dental and vision expenses covered by FSA
Dental work counts fully: cleanings, fillings, root canals, crowns, orthodontia, and tooth extraction. FSA money covers the full cost, not just what your dental insurance leaves unpaid. If you don't have dental insurance, FSA is often the most tax-efficient way to pay for dental care.
Vision expenses include eye exams, glasses, contact lenses, and contact lens solution. Laser eye surgery (LASIK) counts as a medical procedure. Sunglasses do not count, even if they have a prescription, because the IRS considers them cosmetic.
Hearing aids and the cost of fitting them are FSA expenses. Hearing tests also count. If you need a device to treat a medical condition, FSA money usually covers it.
Medical equipment and supplies that may have access to
Crutches, wheelchairs, walkers, and other mobility aids count as FSA expenses. So do blood pressure monitors, glucose meters, and test strips for managing diabetes. Bandages, gauze, and medical tape are covered. Compression stockings prescribed for a medical condition count, but regular support hose for comfort does not.
Oxygen equipment, CPAP machines, and supplies for sleep apnea treatment are FSA expenses. Breast pumps and related supplies count. Pregnancy tests and ovulation kits count because they help diagnose or plan for a medical condition. Condoms do not count because they are considered contraception for prevention of pregnancy rather than treatment of a condition.
If a device or supply is prescribed by a doctor to treat a diagnosed condition, it almost always counts. The key question is whether it treats or prevents illness — not whether it makes you feel better or improves your quality of life.
What does not count, even though it seems medical
Cosmetic procedures do not count, even if they improve your appearance and confidence. Botox, teeth whitening, hair removal, and cosmetic surgery are not FSA expenses. The exception is if the procedure treats a medical condition — for example, surgery to repair a deviated septum counts because it treats a breathing problem, not because it improves your appearance.
Gym memberships, fitness classes, and general wellness programs do not count, even if your doctor recommends exercise. Vitamins and supplements do not count unless they treat a specific diagnosed deficiency. Sunscreen does not count because it is considered cosmetic prevention rather than treatment. Weight loss programs and diet plans do not count unless they are medically supervised treatment for obesity prescribed by a doctor.
Toiletries and hygiene products do not count: toothpaste, mouthwash, deodorant, shampoo, and soap are personal care items, not medical expenses. Hand sanitizer and disinfectant wipes do not count. Masks do not count as FSA expenses, even during a pandemic, because they are considered personal protective equipment rather than medical treatment.
How to know if something counts before you buy it
The IRS publishes a full list of what counts and what doesn't on its website, but the rules can be confusing. A practical test: Does this treat or prevent a diagnosed medical condition, or is it something a healthy person might buy for comfort or appearance?
If you're unsure, ask your FSA plan administrator before you spend the money. Most plans have a customer service line, and they can tell you whether a specific item or service counts. Getting confirmation in writing protects you if the IRS ever questions the expense.
Keep all receipts and documentation. The IRS can audit FSA expenses, and you'll need to prove that what you bought was actually a medical expense. A receipt alone may not be enough — you may need to show a prescription, a doctor's note, or a diagnosis code from your insurance.
The use-it-or-lose-it rule and how to plan spending
FSA money does not roll over to the next year. Whatever you don't spend by December 31 (or by the end of your plan year if your employer uses a different calendar) is forfeited. This is why FSA planning matters: you need to estimate what you'll actually spend and set aside only that amount.
Some employers offer a grace period of up to 2.5 months after the plan year ends, during which you can still spend money from the previous year. Check your plan documents to see if yours does. A few plans also offer a carryover of up to $570 (the limit changes yearly), but most do not.
If you have money left over and no grace period, you can spend it on FSA-may be able to access items before the year ends. Stock up on prescription refills, buy glasses or contacts, schedule dental work, or pay for any medical services you've been putting off. It's better to use the money on something you need than to lose it.
Frequently Asked Questions
Can I use FSA money for my spouse or children?
Yes, as long as they are covered under your FSA plan. Most employer FSA plans cover you, your spouse, and your dependents. You can use FSA money to pay for their medical, dental, and vision expenses. Check your plan documents to confirm who is covered.
Does FSA money cover therapy or mental health counseling?
Yes. Therapy, psychiatry, and counseling sessions all count as FSA expenses. You can use FSA money to pay for copays, coinsurance, and any out-of-pocket costs your insurance doesn't cover. Prescription psychiatric medications also count.
Can I use FSA for over-the-counter pain relievers without a prescription?
Yes, as long as you buy them after January 1, 2020. Ibuprofen, acetaminophen, aspirin, and other over-the-counter pain relievers now count as FSA expenses without a doctor's prescription. The same applies to allergy medicine, cold medicine, and antacids.
What happens if I spend FSA money on something that doesn't count?
You'll owe income tax on that amount, plus a 20 percent penalty. For example, if you spend $100 on something ineligible and you're in the 22 percent tax bracket, you'll owe $42 in taxes and penalties. Keep receipts so you can prove expenses are medical if the IRS questions them.
Can I get my FSA money back if I don't use it?
No. FSA money is forfeited if you don't spend it by the end of the plan year. This is the main drawback of FSA accounts compared to HSAs, which do roll over. Plan carefully and estimate conservatively to avoid losing money.