This FSA-eligible qualified medical expense overview is updated with information for the 2023 and 2024 tax years. Similar to health savings accounts (HSAs), the big benefits that healthcare-related flexible spending accounts (FSAs) provide are tax-free contributions and withdrawals for qualified medical expenses. Used properly, FSAs and HSAs offer a tax break on these expenses that is equivalent to whatever your tax rate is. Unlike HSAs, however, the big drawback to FSAs is that any contributed funds you do not use by the deadline set by your employer are forfeited back to your employer. In other words: use-it-or-lose-it.
If lost contributions surpass the tax savings on spent funds, it is possible that you are net losing money on FSA contributions. This would be… bad. Let’s avoid that. This article will highlight some common, recently new, and surprising ways HSA and FSA-eligible qualified medical expenses to help you avoid losing unspent FSA funds.
Get Familiar with your FSA Plan’s Use-it-or-Lose-it Rules and Spending Deadlines
Before we get to some ways that you can spend down your remaining FSA funds for the year, you should first get reacquainted with your employer’s FSA rules. There are some general FSA guidelines provided by the IRS, but individual employer plans can vary. The 3 key things to know about your FSA are:
- Your remaining FSA balance for the year: this should be easy to find within your FSA account.
- Your employer’s FSA carryover policy: your employer’s plan may vary, but the IRS’s FSA carryover rule allows employer plan participants to carry over up to 20% of the maximum annual FSA contribution (inflation adjusted each year) of their unused FSA balances remaining at the end of a plan year to the next year. With a 2023 maximum FSA contribution of $3,050, FSA plan participants can carry over up to $610 from 2023 to 2024 (20% of $3,050), if their employer’s plan allows it.
- Your employer’s FSA spending deadline: the IRS allows up to a 2 month +15 day grace period where any unused funds contributed in a given year can be used in the first 2 months and 15 days of the following year. It’s not uncommon for the FSA spend deadline to be the end of the calendar year, however.
With the above information, you will know how much you have left to spend, how much you need to spend, and when you need to spend it by. Note that you can use FSA funds on yourself, your spouse, and any declared dependents.
It’s worth noting that all of the FSA-eligible qualified medical expenses listed below are also HSA-eligible. Of course, with an HSA, there are no urgent deadlines to use your balance, so spend as the need arises. Unfortunately, you cannot transfer funds from an FSA to an HSA.
Common HSA & FSA-Eligible Qualified Medical Expenses
Let’s start with a short list of some of the most common HSA & FSA-eligible qualified medical expenses that you can cover with your HSA and FSA funds.
- Doctors visits
- Ambulance fees
- Annual exams (note: annual physical exams typically fully covered by ACA-compliant health insurance plans)
- Birth control pills (this is typically fully covered by ACA-compliant health insurance plans)
- COVID tests and COVID vaccinations (both are typically fully covered by ACA-compliant health insurance plans)
- Dental treatments
- Diagnostic devices (e.g. blood sugar, heart rate)
- Fertility treatments
- Hearing aids
- Hospital services (including overnight stays)
- Immunizations and vaccinations (most are fully covered by ACA-compliant health insurance plans, including flu shots)
- Lab fees (e.g. bloodwork)
- Pregnancy tests and prenatal vitamins
- Prescription medications
- Psychiatric care
- Psychoanalysis and psychologist services
- Surgery
- Therapy
Recently New HSA & FSA-Eligible Qualified Medical Expenses
Next is a list of some of the newer HSA & FSA-eligible qualified medical expenses that you can cover with your HSA and FSA funds.
- Feminine hygiene and menstrual care products and over-the-counter (OTC) medications are now qualified medical expenses thanks to the Coronavirus Aid, Relief and Economic Security (CARES) Act
Surprising HSA & FSA-Eligible Qualified Medical Expenses
And, last but not least, here is a list of some uncommon or surprising HSA & FSA-eligible qualified medical expenses that you can cover with your HSA and FSA funds.
- Acne treatments
- Air quality products: e.g. air purifiers and air filters – with a Letter of Medical Necessity
- Baby care products: including breast pumps and feeding supplies, baby monitors, baby sunscreen, thermometers, potty training products, children’s cold medicine
- Chronic pain treatments: can include acupuncture, chiropractic care, muscle relaxation products
- Condoms, contraceptives, and morning after pills
- Dental care
- Genetic testing kits
- Guide dogs or other service animals: including buying, training, and maintenance costs such as food, grooming, and veterinary care
- Meals purchased while receiving in-patient services: you can include in medical expenses the cost of meals at a hospital or similar institution if a principal reason for being there is to get medical care
- Stop-smoking programs: includes programs or products (must be prescribed or recommended by a doctor).
- Sunscreen: SPF 15+
- Transportation for medical care: includes bus, taxi, train, plane fares, parking fees, or ambulance service, and out-of-pocket vehicle costs (standard mileage rate)
- Vision care: including eye glasses & contact lenses (prescription eyeglasses, contact lenses, or sunglasses), eye surgery, and optometrist visits
Check your specific HSA and FSA plan information, IRS Publication 502, and you may want to consult with a tax professional before using your HSA or FSA to pay for medical expenses. This article is just an informational overview and the details do matter on some of these, so do your homework. When in doubt a doctor’s prescription and/or Letter of Medical Necessity are always good to have on hand.
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