What a Flexible Spending Account Covers

A Flexible Spending Account (FSA) covers medical, dental, and vision expenses that you pay out of your own pocket — but only the ones the IRS has approved. The most common covered items are copays, deductibles, prescription drugs, and dental work. Glasses, contacts, and hearing aids are covered. Over-the-counter medicines like ibuprofen and allergy tablets are covered only if you have a prescription for them. Gym memberships, cosmetic surgery, and most wellness programs are not covered, even if they improve your health.

The key rule: if your health insurance won't pay for it, your FSA might — but only if the IRS says it's a legitimate medical expense. The IRS publishes a list of covered and non-covered items, and it does not always match what feels medical to you. Sunscreen is not covered. Toothpaste is not covered. A hot tub for arthritis is not covered. But a prescription for arthritis medication is.

You contribute pre-tax money to your FSA during your employer's open enrollment period, usually once a year. That money sits in an account you control. When you have a covered expense, you pay for it out of pocket and then either submit a receipt to your FSA plan administrator for reimbursement, or you use an FSA debit card that the plan provides. The money you contribute reduces your taxable income for that year, which is the main financial benefit.

Key Takeaways

  • FSAs cover copays, deductibles, prescription drugs, dental work, vision care, and hearing aids — but not gym memberships, cosmetic procedures, or most over-the-counter items without a prescription.
  • You must contribute during your employer's open enrollment period, and the money you set aside is yours to use only for covered medical expenses in that same calendar year.
  • Money left unspent at the end of the year is forfeited under the "use-it-or-lose-it" rule, though some plans allow a small carryover or grace period.
  • You can submit receipts for reimbursement or use an FSA debit card, depending on what your employer's plan offers.
  • The IRS maintains the official list of covered expenses, and it changes occasionally, so check your plan's summary before assuming something is covered.

Common Covered Expenses

Copays and coinsurance are covered — the amounts you pay when you see a doctor or fill a prescription. Deductibles are covered. Prescription medications are covered. Over-the-counter drugs are covered only if you have a written prescription from a doctor, which means you need to ask your doctor to write one even for something like allergy medicine you could buy without one.

Dental work is covered: cleanings, fillings, root canals, crowns, and orthodontia all count. Vision expenses are covered: eye exams, glasses, contacts, and contact lens solution. Hearing aids and hearing tests are covered. Medical equipment like crutches, wheelchairs, blood pressure monitors, and glucose meters are covered. Therapy copays — physical therapy, mental health counseling, occupational therapy — are covered.

Certain medical supplies are covered: bandages, first aid kits, heating pads, ice packs, and compression sleeves. Pregnancy tests and contraception are covered. Acupuncture is covered if your doctor prescribes it as treatment. Chiropractic care is covered. Insulin and diabetes supplies are covered. The common thread is that the expense must be for diagnosis, treatment, or prevention of a disease or condition — not for general wellness or appearance.

What Is Not Covered

Cosmetic procedures are not covered unless they are medically necessary — for example, reconstructive surgery after an injury or birth defect is covered, but a facelift is not. Gym memberships and fitness classes are not covered, even if your doctor recommends exercise. Weight loss programs are not covered unless they treat a specific disease like obesity-related diabetes, and even then only certain programs may have access to. Vitamins and supplements are not covered unless they treat a specific medical condition and your doctor prescribes them.

Over-the-counter items without a prescription are not covered: no sunscreen, no toothpaste, no deodorant, no shampoo, no pain relievers you buy off the shelf. Cosmetic dental work like teeth whitening is not covered. Eyeglasses for reading that are not prescribed are not covered. Maternity clothes are not covered. Childcare is not covered, even though it may be a dependent care FSA (a different account). Travel to receive medical care is not covered, though the medical care itself is.

Anything related to cosmetic appearance — hair removal, anti-wrinkle creams, teeth whitening — is not covered. Marijuana, even in states where it is legal, is not covered under federal FSA rules. Long-term care insurance premiums are not covered. Health insurance premiums themselves are not covered (though they may be covered under a different account type, like an HSA).

The Use-It-or-Lose-It Rule and Carryover Options

Money you contribute to an FSA in a given year must be spent on covered expenses in that same calendar year. Any money left over at the end of December is forfeited — you lose it. This is the most important limitation of an FSA and the reason you need to estimate carefully how much to contribute.

Some employers offer a small carryover: you can roll up to $640 (as of 2024, though this amount can change) into the next year. Other employers offer a grace period of up to 2.5 months after the end of the year — so you can submit receipts for expenses incurred through February or March and still have them reimbursed from the previous year's FSA balance. Not all plans offer either option, so check your plan documents.

Because of this rule, most people contribute a conservative amount — enough to cover predictable expenses like copays and prescriptions, but not so much that they risk losing money. If you know you will have a major dental procedure or vision expense in the coming year, that is a good time to contribute more. If you are uncertain, contribute less.

How to Use Your FSA and Get Reimbursed

When you have a covered expense, you have two ways to pay for it. If your employer provides an FSA debit card, you can use it directly at the point of sale — at the pharmacy, the doctor's office, or the optical shop. The card draws from your FSA balance. Some merchants will ask you to provide a receipt later to verify the expense was medical; keep receipts for this reason.

If you do not have a debit card, or if the merchant does not accept it, you pay out of pocket and then submit a claim for reimbursement. You send a receipt or explanation of benefits (EOB) from your insurance company to your FSA plan administrator — usually through an online portal, by mail, or by email. The administrator reviews it, confirms it is a covered expense, and sends you a reimbursement check or direct deposit within a few days to a few weeks.

Keep all receipts and EOBs for at least three years. The IRS can audit FSA claims, and you need proof that the expense was real and covered. If you cannot produce a receipt, the reimbursement may be denied and you may owe taxes on that money.

FSA Contribution Limits and Tax Savings

The IRS sets an annual contribution limit for FSAs. As of 2024, the limit is $3,200 per person per year, though this amount can increase in future years. Your employer may set a lower limit. You choose how much to contribute during open enrollment, and that amount is deducted from your paycheck in equal installments throughout the year, before taxes are calculated.

The tax savings come from the fact that FSA contributions reduce your taxable income. If you contribute $2,400 to an FSA and you are in the 22% federal tax bracket, you save about $528 in federal taxes that year. You also avoid paying Social Security and Medicare taxes on that money, which adds another 7.65% in savings. The total savings can be 30% or more, depending on your tax bracket and state taxes.

This is why an FSA is valuable even though the money is forfeited if you do not spend it: the tax savings often outweigh the risk of losing some money. However, you must estimate conservatively. Contribute only what you are confident you will spend.

FSA Versus HSA: Key Differences

An FSA and an HSA are both accounts for medical expenses, but they work differently. An FSA is offered by your employer and has a use-it-or-lose-it rule. An HSA is tied to a high-deductible health insurance plan and allows you to carry money forward indefinitely — it works more like a savings account. An FSA has a higher annual contribution limit ($3,200 versus $4,150 for an individual HSA in 2024), but an HSA lets you invest the money and earn returns.

You can have an FSA and an HSA at the same time if your employer offers both and you are enrolled in a high-deductible plan. However, if you have an FSA, you cannot have a separate Health Savings Account — the rules prevent this. Some employers offer a limited-purpose FSA (for dental and vision only) alongside an HSA, which is allowed.

Choose an FSA if you have predictable medical expenses each year and want the immediate tax savings. Choose an HSA if you want to build long-term savings and can afford to cover medical expenses out of pocket in the short term.

Frequently Asked Questions

Can I use my FSA for my spouse or children?

Yes, you can use your FSA for any family member you claim as a dependent on your taxes — your spouse, children, and sometimes parents or other relatives. The money in your account is not limited to your own medical expenses. You can submit receipts for your spouse's dental work or your child's glasses.

What happens to my FSA money if I leave my job?

You lose any money remaining in your FSA when you leave your employer. FSA accounts are tied to your employer's plan and do not transfer. You have a short window (usually 60 days) to submit any outstanding receipts for reimbursement before the account closes. If you move to a new job, you can start a new FSA there during that employer's open enrollment.

Can I get a prescription for over-the-counter medicine just to use my FSA?

Technically yes — your doctor can write a prescription for ibuprofen, allergy medicine, or other over-the-counter drugs, and then those items become FSA-covered. However, this is not a loophole. The IRS requires that the prescription be medically necessary, not just a way to access FSA funds. If you genuinely need the medication, ask your doctor for a prescription. If you are asking only to use your FSA, do not.

Do I have to submit receipts if I use an FSA debit card?

Not always, but you should keep receipts anyway. Some merchants automatically send proof of the medical expense to your FSA administrator, so no receipt is needed. Others require you to submit one later. The safest approach is to save every receipt for three years in case the IRS audits your account or your administrator questions a charge.

Can I change my FSA contribution amount during the year?

Only if you have a may have access to life event: marriage, divorce, birth of a child, loss of other health coverage, or a significant change in your expenses. You cannot change your contribution just because you want to. If you contribute too much and realize mid-year you will not spend it, you are stuck — the money will be forfeited at year-end unless your plan offers a carryover or grace period.