A Flexible Spending Account (FSA) is an attractive option for American workers who want to keep a lid on their out-of-pocket healthcare costs. As an employer-sponsored benefit, it lets you set aside some pre-tax cash from each paycheck for things like medical, dental, and vision expenses. To get the most out of this handy tax-advantaged account, you need to know what you can and can't use it for - otherwise you might be leaving money on the table.
At its heart, an FSA is designed to cover a pretty wide range of medical expenses that your health insurance won't touch - and that includes some pretty obvious stuff like doctor's co-pays, deductibles, and prescription meds. Whenever you visit the doctor, dentist, or eye specialist, the immediate costs are definitely FSA-eligible. And while it's easy to just think about those immediate costs, you should also be thinking about things like lab tests, X-rays, and specialist consultations - all of which are usually good to go. If you've got a chronic condition, you know that prescription costs can add up fast. For people in that situation, an FSA can be a lifesaver when it comes to keeping those regular bills down.
Beyond the basics, there are plenty of other FSA-eligible expenses - and some of them might be things you're already buying all the time. Take OTC medications for example - these are generally wide open for FSA use. That means you can use your pre-tax dollars on pain relievers like ibuprofen or acetaminophen, cold and flu meds, allergy meds, antacids and a bunch of other common household health items. The CARES Act made it so you no longer need a doc's prescription to buy these kinds of things, which makes it a whole lot easier to use your FSA for them. And don't forget first-aid supplies like bandages, antiseptic wipes and gauze - these are all good to go with your FSA funds, so you can stock up your home medicine cabinet with pre-tax cash.
Vision care is another huge area where FSA funds can make a big difference in your wallet. This includes not just eye exams but also prescription glasses, contact lenses and even those special cleaning solutions you need. And if you're thinking about getting laser eye surgery like LASIK, that's usually FSA eligible too - which can represent a serious saving on a major medical expense. On the dental front, FSA funds can cover things like cleanings, fillings, crowns and even braces for both kids and grown-ups - all of which can really help with the sticker shock of keeping your teeth and gums in good health.
The scope of what FSA eligibility covers also includes a whole bunch of medical devices and supplies. Blood pressure monitors, glucose meters and test strips, thermometers, crutches, breast pumps and the supplies that come with them are all pretty much a given. And if you've got a particular health issue your doctor has recommended some specialized gear or a specific therapy device, that might be something you can get reimbursed for. Even the little things like getting sunscreen that's SPF 15 or better, or any kind of menstrual products (pads, tampons, liners, cups) - its pretty standard now to see these as eligible expenses - after all people have different health needs, especially those that are pretty basic to living a healthy life.
Its really worth knowing the difference between a Health FSA and a Dependent Care FSA - also known as a DCFSA. While one is for covering medical bills, the other is for dependent care - like daycare, preschool or for looking after elderly relatives. This lets you take some of your pay before tax and use it to pay for these services. These are totally separate accounts with their own rules and limits.
One key thing to keep in mind when you're managing your FSA is the 'use it or lose it' rule. If you don't use up your funds by the end of the year they're gone for good - but a lot of employers will give you a bit of extra time (usually you can have up to 2 and a half months after the start of the new year) to get something taken care of. Or, they might let you carry some of your leftover cash over a certain amount into the next year. What you can do really depends on what your employer has set up so its worth checking to avoid losing out. Trying to plan your medical spending in advance - especially as the year is wrapping up - will really help you to be able to use up all your allocated cash on things you are eligible for. Being proactive this way not only helps you to avoid losing your hard-earned cash but will also make it easier to keep a lid on the financial costs of your medical needs.
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