What you can buy with FSA funds

Your FSA money can pay for medical, dental, and vision expenses that your health insurance doesn't cover or only partially covers. The IRS publishes a list of may be able to access items, and it's longer than most people expect — it includes things beyond just doctor visits.

Common may be able to access expenses include copays, coinsurance, deductibles, prescription medications, dental work, glasses and contact lenses, hearing aids, and over-the-counter items like pain relievers, allergy medicine, and antacids (though you need a prescription for most OTC drugs as of 2020). You can also use FSA money for mental health counseling, physical therapy, chiropractic care, and certain medical equipment like crutches or blood pressure monitors.

The key rule: the expense must be for you, your spouse, or your dependent children — not for a parent or adult sibling, even if you claim them on your taxes. And the service or item must be primarily medical in nature. Cosmetic procedures, gym memberships, and general wellness products don't count, even if they improve your health.

Key Takeaways

  • FSA funds cover copays, deductibles, prescriptions, dental work, vision care, and many over-the-counter medical items, but you need a prescription for most OTC drugs.
  • You can only use the money for yourself, your spouse, or your dependent children — not for parents or other relatives.
  • Keep receipts and documentation for every purchase because your FSA plan administrator may ask you to prove the expense was medical.
  • Unused FSA money at the end of the year is forfeited under the "use-it-or-lose-it" rule, though some plans offer a grace period or carryover of up to $610.
  • You pay for the expense out of pocket first, then submit a claim to your FSA plan to get reimbursed.

How to actually spend the money

You don't hand your FSA card to a doctor and walk away. Instead, you typically pay the full amount out of your own pocket at the time of service, then request reimbursement from your FSA plan administrator.

Some employers issue an FSA debit card that you can swipe at pharmacies, doctor offices, or medical supply stores — this skips the reimbursement step and pays directly. If your plan offers a debit card, you'll receive it in the mail before your plan year begins. Not all plans offer this option, so check with your employer's benefits office.

If you don't have a debit card, you'll need to submit a claim. This usually means filling out a form (on paper or online through your plan's website) and attaching a receipt or explanation of benefits from your provider. Your plan administrator will review it and send you a check or deposit the money into your bank account. This process typically takes one to three weeks.

Keeping records so you don't lose money

Your FSA plan administrator has the right to ask you to prove that an expense was actually medical and actually happened. This is called substantiation, and it's not optional — if you can't provide proof, the plan can deny your reimbursement or even require you to pay the money back.

Keep every receipt, invoice, and explanation of benefits for at least three to five years. A receipt should show the date, the provider's name, what was purchased or treated, and the amount paid. For prescriptions, the pharmacy receipt works. For doctor visits, an explanation of benefits from your insurance company is usually enough. For over-the-counter items bought at a pharmacy or drugstore, the receipt must clearly show it was a medical item — a generic receipt that just says "CVS" without itemization may not be sufficient.

If you use an FSA debit card, your plan administrator automatically tracks the transaction, but you should still keep your receipt in case they ask for proof later. If you lose a receipt, contact the provider or pharmacy and ask for a duplicate — most will provide one.

The use-it-or-lose-it rule and how to plan around it

Money left in your FSA at the end of the plan year is forfeited. You cannot roll it over to next year or cash it out. This is the biggest trap FSA owners face, and it's why you need to estimate carefully when you enroll.

However, some plans offer a grace period of up to two and a half months into the next plan year to spend remaining money. Others allow you to carry over up to $610 (this amount changes yearly) into the next year. Check your plan documents or ask your benefits office which option your employer uses — not all plans offer either.

To avoid losing money, think through the next 12 months: dental work you've been putting off, new glasses or contacts, prescription refills you'll need, and any planned medical procedures. If you're unsure whether you'll use the full amount you're allowed to contribute, choose a lower amount. For 2024, the maximum FSA contribution is $3,300 per person, but you don't have to contribute that much.

What happens if you use an FSA debit card

An FSA debit card works like a regular debit card at the point of sale, but behind the scenes it's different. When you swipe it at a pharmacy or doctor's office, the transaction goes to your plan administrator first. They check whether the merchant is a medical provider and whether the expense is may be able to access. If it passes, the money comes out of your FSA account when ready.

Some merchants — particularly large retailers like Target or Walmart — may not be set up to accept FSA debit cards for over-the-counter items, even though those items are may be able to access. If the card is declined, you'll need to pay out of pocket and submit a manual claim instead. This is frustrating but common.

If you accidentally use your FSA debit card for something ineligible, contact your plan administrator right away. They may reverse the transaction or ask you to repay the amount. Don't assume the transaction went through just because the card was accepted — some merchants don't validate may be able to access at the register.

Coordinating FSA spending with insurance claims

Your FSA is secondary to your health insurance. This means you file a claim with your insurance first, they pay their portion, and then you use FSA money to cover what's left over — the copay, coinsurance, or deductible.

When you submit an FSA reimbursement claim, you'll usually need to include an explanation of benefits from your insurance company showing what they paid and what you owe. This proves that the amount you're asking the FSA to reimburse is actually your out-of-pocket cost, not the full bill.

If you have both an FSA and a Health Savings Account (HSA), you cannot use both for the same expense. You must choose one or the other. Most people use their HSA first because it rolls over year to year, then use their FSA for remaining expenses before the plan year ends.

Common mistakes that cost you money

The most expensive mistake is overestimating how much you'll spend and losing the remainder. The second is not keeping receipts and then being unable to prove an expense was medical when your plan asks. The third is using the FSA debit card at a retailer that doesn't validate may be able to access, then discovering the transaction was ineligible and having to repay it.

Another frequent error is buying items that seem medical but aren't covered — vitamins, supplements, and general wellness products are not may be able to access unless prescribed by a doctor for a specific medical condition. Sunscreen, toothpaste, and cosmetic skincare are never may be able to access. If you're unsure, ask your plan administrator before you buy.

Finally, some people forget that FSA money is only for you and your dependents. You cannot use it to pay for a parent's medical expenses, even if you support them financially. This is an IRS rule, not a plan choice.

Frequently Asked Questions

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

Yes, if your spouse is covered under your FSA plan. When you enroll, you choose whether to cover just yourself or yourself plus your spouse and dependents. If your spouse is enrolled, you can use your FSA balance for their may be able to access medical expenses. If your spouse has their own FSA through their employer, they must use their own account for their expenses.

What if I don't use all my FSA money by the end of the year?

The money is forfeited unless your plan offers a grace period or carryover. A grace period lets you spend remaining money for up to two and a half months into the next plan year. A carryover lets you roll up to $610 into the next year. Check your plan documents to see which option applies. If neither applies, the unused balance is lost.

Do I need a prescription to buy over-the-counter medicine with my FSA?

As of 2020, yes — most over-the-counter medications require a prescription from a doctor to be FSA-may be able to access. This includes pain relievers, allergy medicine, cold medicine, and antacids. Exceptions exist for items like bandages, first aid supplies, and certain medical devices, which don't require a prescription. Ask your pharmacist or plan administrator if you're unsure about a specific item.

Can I use my FSA debit card at any store?

Only at stores and providers that accept FSA debit cards and sell may be able to access items. Pharmacies and medical offices almost always accept them. Large retailers like Target or Walmart may decline the card for over-the-counter items even though those items are may be able to access. If the card is declined, pay out of pocket and submit a manual claim to your plan administrator.

What happens if my plan administrator asks for proof of an expense?

Provide a receipt, invoice, or explanation of benefits showing the date, provider name, what was purchased or treated, and the amount paid. If you can't provide proof, the plan can deny your reimbursement or ask you to repay money already distributed. Keep all receipts for at least three to five years in case you're asked.