Maximizing Your FSA Funds: What You Can Use Them For

Quick answer

• Use your Flexible Spending Account (FSA) for eligible healthcare or dependent care expenses to avoid losing funds.
• Track eligible expenses and receipts throughout the year to make informed spending decisions.
• Understand your FSA’s “use-it-or-lose-it” rule and any grace period or carryover options.
• Prioritize using funds for recurring or anticipated medical costs, such as prescriptions or copays.
• Consider purchasing over-the-counter (OTC) medical supplies or equipment if you have a health need.
• Submit claims promptly to ensure you receive reimbursement before the deadline.

Who this is for

• Employees who have enrolled in a Flexible Spending Account (FSA) through their employer.
• Individuals looking to understand the range of eligible expenses for their FSA.
• People who want to avoid forfeiting FSA funds at the end of the plan year.

What to check first (before you act)

Your FSA Plan Details

Before spending a dime, it’s crucial to understand the specifics of your FSA. This includes knowing the exact amount you’ve elected to contribute, your plan year dates, and any specific rules set by your employer or FSA administrator.

Eligible Expenses List

Your FSA administrator will provide a list of qualifying expenses. This is your primary guide. It typically includes medical, dental, and vision care costs not covered by your primary insurance. Always refer to this official list to avoid ineligible purchases.

Reimbursement and Claim Deadlines

FSA funds often have a strict deadline for submitting claims, usually shortly after the plan year ends. There might also be a grace period or a limited carryover amount allowed to the next plan year. Knowing these dates is critical for timely reimbursement.

How can I use FSA money?

Step-by-step (simple workflow)

1. Review Your FSA Election and Plan Year

What to do: Check your enrollment confirmation or HR portal to confirm your elected FSA amount and the start and end dates of your plan year.
What “good” looks like: You clearly know your total FSA contribution and when the “use-it-or-lose-it” period ends.
A common mistake and how to avoid it: Assuming your plan year aligns with the calendar year. Many employers have different plan year dates. Double-check your specific plan documents.

2. Understand Your FSA Administrator’s Eligible Expenses List

What to do: Access the official list of eligible expenses provided by your FSA administrator. This is usually found on their website or in your benefits package.
What “good” looks like: You have a clear understanding of what categories of expenses are covered, from copays to specific medical supplies.
A common mistake and how to avoid it: Relying on general knowledge or outdated information. Eligibility rules can change. Always use the most current list from your administrator.

3. Track Your Spending and Save Receipts

What to do: Keep a running tally of all potential FSA-eligible expenses throughout the year. Save all itemized receipts and Explanation of Benefits (EOB) statements.
What “good” looks like: You have a well-organized system for tracking expenses and readily available documentation for any claim.
A common mistake and how to avoid it: Not keeping detailed receipts or losing them. Many administrators require itemized receipts, not just credit card slips.

4. Identify Recurring or Anticipated Medical Costs

What to do: Think about your typical healthcare needs. Do you have regular doctor visits, prescriptions, or therapy sessions?
What “good” looks like: You’ve identified predictable expenses that can help you utilize your FSA funds proactively.
A common mistake and how to avoid it: Waiting until the end of the year to figure out how to spend. This can lead to rushed, ineligible purchases.

5. Explore Over-the-Counter (OTC) Medical Purchases

What to do: Check your eligible expenses list for approved OTC items. This can include bandages, crutches, diagnostic tests, and even certain over-the-counter medications (though check specific rules for prescription requirements).
What “good” looks like: You’ve identified useful OTC items that can address minor health needs and use up remaining funds.
A common mistake and how to avoid it: Purchasing items that are not explicitly listed as eligible. For example, general wellness supplements are often not covered.

6. Consider Dental and Vision Expenses

What to do: Review your FSA eligibility for dental and vision care. This can include check-ups, cleanings, glasses, contact lenses, and even some procedures.
What “good” looks like: You’ve scheduled or paid for dental or vision appointments and services that are covered.
A common mistake and how to avoid it: Assuming cosmetic dental work or non-prescription eyewear accessories are covered. Stick to medically necessary treatments and items.

7. Plan for Dependent Care FSA (DCFSA) if Applicable

What to do: If you have a DCFSA, understand its specific rules for eligible care providers and expenses (e.g., daycare, before/after-school programs).
What “good” looks like: You’ve made arrangements for childcare that qualify and are within the DCFSA limits.
A common mistake and how to avoid it: Paying a family member who is not a qualified care provider or using funds for activities not considered care (e.g., tutoring).

8. Submit Claims Promptly

What to do: Once you’ve incurred an eligible expense, submit your claim and documentation to your FSA administrator as soon as possible.
What “good” looks like: Your claims are processed efficiently, and you receive your reimbursements in a timely manner.
A common mistake and how to avoid it: Delaying claim submission until the very last minute. This increases the risk of missing the deadline or having incomplete documentation.

9. Utilize Any Grace Period or Carryover

What to do: If your plan offers a grace period or carryover, understand its limits and how to use it effectively for expenses incurred in the new plan year.
What “good” looks like: You’ve successfully used a grace period or carryover to cover additional eligible expenses without losing funds.
A common mistake and how to avoid it: Forgetting about the grace period or carryover deadline, or exceeding the carryover limit.

Common mistakes (and what happens if you ignore them)

Mistake	What it causes	Fix
Not tracking expenses throughout the year	Difficulty using up funds, potential forfeiture	Maintain a spreadsheet or app to log all potential FSA expenses and save all itemized receipts.
Assuming an expense is eligible	Claim denial, loss of funds if not re-spent	Always verify with your FSA administrator’s official list of eligible expenses before making a purchase.
Missing claim submission deadlines	Forfeiture of funds	Note your plan year end date and claim submission deadline. Submit claims as soon as possible.
Losing itemized receipts	Claim denial	Keep all original, itemized receipts. Consider taking photos or scanning them for digital backup.
Not understanding the “use-it-or-lose-it” rule	Forfeiture of unused funds	Familiarize yourself with your plan’s specific rules regarding grace periods and carryovers.
Purchasing non-eligible items	Claim denial, potential forfeiture of funds	Stick strictly to the list of eligible expenses provided by your administrator. If in doubt, ask before buying.
Forgetting about dental and vision FSA use	Unused funds, missed opportunity for savings	Schedule routine dental and vision appointments early in the plan year to use your FSA funds for these services.
Misunderstanding Dependent Care FSA rules	Claim denial for ineligible care providers/expenses	Ensure your care provider is qualified and the expenses are for care, not enrichment activities, as defined by IRS rules.
Relying on general knowledge, not plan specifics	Ineligible purchases, claim denials	Always refer to your specific FSA plan documents and your administrator’s website for the most accurate and up-to-date information.
Procrastinating on spending	Rushed, potentially ineligible purchases, forfeiture	Start planning how to use your FSA funds early in the plan year, especially for recurring or anticipated expenses.

Decision rules (simple if/then)

• If you have recurring prescription costs, then use your FSA to cover them because this is a predictable and eligible expense.
• If your FSA plan year is ending soon and you have a significant balance, then explore purchasing approved over-the-counter medical supplies or equipment because these can be easier to purchase quickly than scheduling appointments.
• If you have a high-deductible health plan, then consider using your FSA for eligible medical expenses to reduce your out-of-pocket costs because it offers pre-tax savings.
• If you have children requiring daycare or before/after-school care, then use your Dependent Care FSA (DCFSA) for these costs because they are specifically designed for these types of expenses.
• If you are unsure about an item’s eligibility, then contact your FSA administrator before purchasing it because this prevents claim denials and potential loss of funds.
• If your plan offers a grace period, then use it strategically for expenses incurred in the new plan year if you still have funds to utilize, but be aware of the deadline.
• If you have unused funds near the end of your plan year and no immediate medical needs, then consider buying items like first-aid kits, over-the-counter pain relievers, or reading glasses if they are on your eligible list, as a way to avoid forfeiture.
• If you have a dental or vision appointment scheduled, then use your FSA to pay for copays, deductibles, or specific services like cleanings or new glasses because these are common eligible expenses.
• If you are planning for a medical procedure or treatment, then check if your FSA can cover deductibles or copays associated with it because this can significantly reduce your out-of-pocket burden.
• If you have a health savings account (HSA) in addition to an FSA, then understand that funds are generally not interchangeable; use your FSA for eligible expenses within its plan year and your HSA for its own set of rules.
• If you are self-employed, then you cannot typically have an FSA through an employer unless you are an employee of your own corporation. Consult a tax professional for alternatives.

FAQ

Can I use my FSA money for over-the-counter medications?

Yes, many over-the-counter medications are eligible for FSA reimbursement, but always check your specific FSA administrator’s list. Some may require a Letter of Medical Necessity from your doctor.

What happens if I don’t use all my FSA money by the deadline?

Generally, you will forfeit any unused funds. However, some plans offer a grace period to spend funds into the next plan year or allow a limited amount to be carried over. Check your plan details.

How do I submit a claim for reimbursement?

You typically submit a claim form along with itemized receipts and an Explanation of Benefits (EOB) statement to your FSA administrator. Many offer online portals or mobile apps for easy submission.

Can I use my FSA for gym memberships?

Generally, no. Gym memberships are usually considered for general wellness and are not eligible unless prescribed by a doctor for a specific medical condition and documented with a Letter of Medical Necessity.

What is a “use-it-or-lose-it” rule?

This rule means that if you don’t use your FSA funds for eligible expenses by the end of your plan year (or grace period/carryover limit), you will lose the remaining balance.

Can I use my FSA for my spouse or dependents?

Yes, you can use your FSA funds for eligible medical, dental, and vision expenses for yourself, your spouse, and your eligible dependents.

What is a Letter of Medical Necessity (LMN)?

An LMN is a written statement from your doctor that a specific item or service not typically considered eligible is medically necessary for your treatment. It’s required for certain expenses, like some over-the-counter medications or special equipment.

Can I get a refund if I overspend my FSA?

No, you cannot overspend your FSA. Your contributions are limited to your elected amount for the plan year. Reimbursements are only made up to the amount you have contributed and elected.

What this page does NOT cover (and where to go next)

• Specific tax implications of FSA contributions beyond the pre-tax benefit.
• Detailed comparisons between FSAs, HSAs, and HRAs.
• Eligibility requirements for FSAs for self-employed individuals or small business owners.
• How to navigate complex medical billing and insurance disputes.
• Investment advice related to any health savings accounts.