A Flexible Spending Account (FSA), also known as a Flexible Spending Agreement, is a special account that allows you to pay for certain health care costs out of your own pocket.
Funds are transferred into your FSA through payroll deduction throughout the year, which you spend on eligible expenses. However, at the end of the year, you may have some money left over. In most cases, you will lose the money unless you spend it on products and services covered by your FSA. 1 It makes sense to stock up on any medical supplies you might need, and even dental care can cover costs you put off.
You can browse sites like the FSA Store, Health Products for You, Target, or Amazon’s FSA Store to shop for essentials you might need that are covered by the FSA. The list of things you can buy with FSA money is long and includes some unexpected items and services.
Below we list some points that you may not want the FSA to cover. However, if you are not sure about a particular item, you should check the list on the IRS website or ask your pharmacist or doctor
How the FSA Works
An FSA is an account that you fund throughout the year. FSAs are provided by your employer. If you get a health insurance plan through your job, you can use your FSA to pay for co-pays, deductibles, some drugs, and certain other health care costs. Use an FSA to reduce your taxes.
You put money into an FSA before it’s taxed. In other words, you don’t pay taxes on the money you invest in your FSA. That means the amount you save equals the tax you pay on the money you set aside. You can save a lot of money this way. If you earn $50,000 a year and have a 30% tax rate, TurboTax estimates that putting $2,000 into an FSA account will save you $600.
You typically have to use the money in the FSA during the plan year. However, your employer may offer one of two options:
- It can provide a grace period of up to 2.5 months to use the funds in the FSA.
- It allows you to transfer up to $610 per year for use in the following year.
Your employer may offer one of these options, but not both. Company is under no obligation to provide both services.
At the end of the year or during the grace period, you lose all unused funds in your FSA. So it’s important to plan carefully and not put more money into your FSA than you think you’ll spend in a year on things like co-pays, coinsurance, drugs, and other eligible health care expenses.At the end of the year, most people have a little money left in their FSA, and you may not be sure how to spend it. Below we’ve listed some helpful items to spend your FSA money on. If you or a family member needs a specific medical supply, you should check the full list on the IRS website, or check with your pharmacist or doctor to see if your needs are covered.
A word of warning: some of these items require a doctor’s prescription. So make sure you can buy them with your FSA card before heading to the counter.
Health-Promoting Dietary Supplements
Dietary supplements can be an FSA-eligible expense in some cases, and that’s a good example of why it’s important to understand how an FSA works. You generally can’t go to your local grocery store and buy a jar of protein powder or a bottle of supplements and pay for them with FSA money.
However, if your doctor diagnoses you with a medical condition and recommends these products for treatment, the IRS considers these dietary supplements to be FSA-eligible items. Before trying to pay for supplements with your FSA funds, make sure you get a written prescription from your doctor.
Smoking cessation program
Smoking is obviously bad for your health. According to the Centers for Disease Control and Prevention (CDC), the nicotine found in tobacco can be just as addictive as heroin, cocaine, or alcohol. In 2015, the CDC found that 68 percent of adult smokers in the United States wanted to quit.
But you can’t just grab a pack of Nicorette at Walgreens and pay with your FSA money. To qualify for FSA funds, you must first get a prescription for a smoking cessation program from your doctor.
If you are considering laser eye surgery and have funds left in your FSA account, now may be the time to start planning your procedure. These vision correction procedures are quick and require only local anesthesia.
The IRS allows you to use your FSA funds to pay for vision-correcting eye surgery such as: B. Laser eye surgery or radial keratotomy. Laser eye surgery changes the shape of the cornea, allowing you to see without glasses or contacts.
Insurance usually does not cover this treatment because of its optionality. So if you have poor vision, paying with FSA funds can lower your overall costs.