What a Flexible Spending Account Covers

A Flexible Spending Account (FSA) lets you set aside pre-tax money to pay for certain medical and dependent care costs. The IRS maintains a specific list of what counts as an may have access to medical expense, and only those items can be purchased with FSA funds without tax penalty. If you spend FSA money on something not on that list, you owe income tax plus a 20 percent penalty on the amount.

The list is longer than most people expect — it includes many over-the-counter items and services — but it has real limits. Cosmetic procedures, general wellness products, and most health-related items that are not medically necessary do not may have access to, even if they help you feel better.

Your employer's FSA plan document may be more restrictive than the IRS rules allow, so what one company covers might differ from another. Before you fund an FSA, ask your benefits administrator for a written list of covered expenses under your specific plan.

Key Takeaways

  • FSA funds cover doctor visits, prescriptions, dental work, vision care, and many over-the-counter medical items, but only if the IRS classifies them as medically necessary.
  • Cosmetic procedures, vitamins, gym memberships, and most wellness products do not may have access to, even if they improve your health.
  • Your employer's plan may exclude items the IRS allows, so you need to check your specific plan document before spending.
  • Unused FSA money is forfeited at the end of the plan year in most cases — there is no rollover to the next year.
  • You can use FSA funds for dependent care (childcare, adult day care) through a separate dependent care FSA, which has its own spending limit and rules.

Medical Expenses That may have access to

Prescription medications and insulin are always covered. Over-the-counter drugs like ibuprofen, acetaminophen, allergy medicine, and cold medicine also may have access to — you do not need a prescription. Bandages, first aid supplies, thermometers, blood pressure monitors, and glucose meters all count.

Doctor visits, dentist appointments, eye exams, and therapy sessions are covered. So are dental crowns, root canals, orthodontia, and vision correction (glasses, contacts, LASIK surgery). Hearing aids and hearing aid batteries may have access to. Mental health counseling and psychiatric care are covered expenses.

Medical equipment like crutches, wheelchairs, walkers, and oxygen tanks qualifies. Copays and coinsurance for any covered medical service count toward FSA spending. Deductibles for health insurance also may have access to. If your employer offers an FSA, you can use it alongside a high-deductible health plan paired with an HSA — the two accounts work separately and do not interfere with each other.

Over-the-Counter Items You Can and Cannot Buy

The rules for over-the-counter items changed in 2020. Before that year, you could not use FSA funds for over-the-counter drugs without a prescription. Now you can — but only for actual medications, not for general wellness or beauty products that happen to be sold in a pharmacy.

Sunscreen does not may have access to because it is considered cosmetic, even though it prevents skin damage. Toothpaste and mouthwash do not may have access to. Shampoo, conditioner, and other hair products do not may have access to. Deodorant does not may have access to. Lotion and lip balm do not may have access to, even medicated versions. The distinction is whether the product treats a medical condition or is primarily a grooming or beauty item.

Hand sanitizer, disinfectant wipes, and masks do not may have access to for FSA spending. Vitamins and nutritional supplements do not may have access to unless they are prescribed by a doctor to treat a specific deficiency or medical condition — and even then, your plan may not cover them. Probiotics, collagen, and other wellness supplements do not may have access to. Pregnancy tests and contraception do not may have access to under FSA rules, though they may be covered by your health insurance separately.

Dependent Care FSA Expenses

A separate type of FSA covers dependent care costs — childcare, preschool, after-school care, and adult day care for an elderly or disabled family member. The dependent must be under age 13 (or unable to care for themselves) and claimed as a dependent on your tax return. The care must allow you to work or attend school.

Summer camps and overnight care do not may have access to. Kindergarten and school tuition do not may have access to, even if the school provides before- and after-school care. However, the cost of before- and after-school care at that school can be separated and covered if your plan allows it. Babysitting, nanny services, and in-home childcare all may have access to.

The dependent care FSA has a separate annual spending limit from the medical FSA — usually lower, around $2,500 to $5,000 depending on your employer. Money does not roll over between the two accounts, and unused dependent care funds are also forfeited at year-end.

What Happens to Unspent Money

FSA plans operate under a use-it-or-lose-it rule. Money you do not spend by the end of the plan year is forfeited — you cannot carry it to the next year. Some employers offer a grace period of up to 2.5 months into the next year to spend remaining funds, but this is optional and not all plans include it. A few employers allow a $570 carryover (the amount changes yearly with inflation), but most do not.

Because of this rule, you should estimate conservatively how much you will spend on medical and dependent care costs in the coming year. If you overestimate and cannot spend the money, you lose it. If you underestimate, you pay out of pocket for expenses above your FSA limit.

How to Know What Your Plan Covers

Your employer's benefits administrator or HR department can provide a written summary of covered expenses under your specific FSA plan. Some employers post this information on their benefits portal or in the plan document itself. The IRS publishes a full list of may have access to medical expenses in Publication 502, which you can download from the IRS website.

When in doubt about a specific item, ask your FSA administrator or the company managing your FSA account before you spend the money. If you buy something and later learn it does not may have access to, you will owe taxes and penalties on that amount. Keeping receipts and documentation is important — your FSA provider may ask for proof that an expense qualifies.

Frequently Asked Questions

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

Yes, if your spouse is claimed as a dependent on your tax return. You can use your FSA to pay for your spouse's doctor visits, prescriptions, dental work, and other may have access to medical expenses. The money in your FSA is yours to spend on any family member's covered costs, not just your own.

Does FSA cover weight loss programs or gym memberships?

No. Weight loss programs, gym memberships, and fitness classes do not may have access to, even if your doctor recommends them for health reasons. However, if your doctor prescribes a specific medically supervised weight loss program to treat obesity or another medical condition, some plans may cover it — check your plan document.

Can I use FSA for mental health counseling?

Yes. Therapy, counseling, and psychiatric care are covered medical expenses. Copays and coinsurance for mental health visits count, as do any out-of-pocket costs for sessions not covered by insurance. This applies whether you see a therapist in person, by phone, or by video.

What if I have both an FSA and an HSA?

You can have both accounts at the same time if your FSA is a dependent care FSA. You cannot have a medical FSA and an HSA in the same year — the IRS does not allow it. If you have a medical FSA, you are not may be able to access to open an HSA that year. If you have an HSA, you cannot open a medical FSA.

Do I lose my FSA money if I change jobs?

Yes. FSA accounts are tied to your employer's plan, and the money does not follow you to a new job. If you leave your job mid-year, you typically lose any unspent FSA balance. Some employers allow you to continue FSA coverage under COBRA, but you would have to pay the full premium yourself, and the money still does not roll over to a new employer's plan.