A flexible spending account covers medical, dental, and vision expenses you pay out of your own pocket

A flexible spending account (FSA) is a workplace benefit that lets you set aside pre-tax money to pay for healthcare costs. The money comes from your paycheck before taxes are taken out, which lowers your taxable income for the year. You decide how much to contribute each year during your employer's open enrollment period, and that money sits in an account you draw from when you have a covered expense.

The catch is straightforward: you choose the amount, and if you don't spend it by the end of the plan year, you lose it. That's why understanding what counts as a covered expense matters before you decide how much to contribute.

Key Takeaways

  • FSAs cover copays, coinsurance, deductibles, and out-of-pocket costs for medical, dental, and vision care—but not insurance premiums themselves.
  • Common covered items include prescription medications, glasses, contact lenses, hearing aids, and mental health counseling.
  • Over-the-counter items like pain relievers and allergy medicine are covered only if you have a prescription or a doctor's written order.
  • You contribute money before taxes are taken out, which reduces your taxable income, but unspent money at year-end is forfeited.
  • Some employers offer a grace period or carryover that lets you keep a small amount of unused funds, but this varies by plan.

Medical expenses FSAs actually cover

FSAs pay for the out-of-pocket costs you owe after insurance processes a claim. This includes copays (the flat fee you pay at the doctor's office), coinsurance (your percentage of the bill after insurance pays its share), and deductibles (the amount you pay before insurance kicks in). If you have a high-deductible health plan, an FSA can help you cover that deductible faster.

Prescription medications are covered, as are insulin and other diabetes supplies. Mental health counseling and therapy sessions count as medical expenses. If your doctor orders medical equipment—a cane, crutches, a blood pressure monitor, or a heating pad for therapeutic use—the FSA covers it. Acupuncture, chiropractic care, and physical therapy are covered if a doctor prescribes them.

Preventive care like annual physicals and vaccinations are covered. If you need surgery or hospitalization, the FSA covers your share of the costs. Fertility treatments, including in vitro fertilization, are covered expenses for many FSA plans, though you should check your specific plan document.

Dental and vision coverage through an FSA

Dental work is a major FSA category. Cleanings, fillings, root canals, crowns, and extractions are all covered. Orthodontic work—braces and retainers—is covered. Dentures and dental implants count as covered expenses. You pay for these out of pocket and then reimburse yourself from your FSA.

Vision expenses include eye exams, glasses, contact lenses, and contact lens solution. Laser eye surgery (LASIK) is covered. Hearing aids and hearing aid batteries are covered as medical devices. If you need prescription sunglasses for a medical reason, they may be covered, but fashion sunglasses are not.

Over-the-counter items: when they're covered and when they're not

Over-the-counter medications like ibuprofen, acetaminophen, allergy pills, and cold medicine are covered only if you have a prescription from a doctor or a written order stating the medical need. A doctor's note saying "patient should take ibuprofen for arthritis" is enough. Without that documentation, the FSA will deny the reimbursement.

Bandages, first aid supplies, and thermometers are covered without a prescription. Sunscreen is not covered unless prescribed for a specific skin condition. Vitamins and supplements are generally not covered unless a doctor prescribes them for a diagnosed deficiency. Pregnancy tests and contraception are covered. Pain relief creams and ointments are covered if they're medically necessary, but cosmetic creams are not.

What FSAs do not cover

Insurance premiums themselves—what you pay monthly for health, dental, or vision coverage—are not FSA-may be able to access. Cosmetic procedures like teeth whitening or Botox are not covered unless they're part of reconstructive surgery after an injury or illness. Gym memberships and fitness equipment are not covered, even if your doctor recommends exercise.

Toiletries like toothpaste, shampoo, and soap are not covered. Maternity clothes are not covered. Over-the-counter items without a prescription are not covered. Childcare and dependent care are handled through a separate account type (a dependent care FSA), not a medical FSA. Travel to receive medical care is not covered, though the medical care itself is.

How to use your FSA and track what you spend

When you have a covered expense, you pay for it out of pocket. Your employer or the FSA administrator gives you a debit card, or you submit a claim form with a receipt and an explanation of benefits from your insurance. The FSA reimburses you by depositing money into your account or sending a check.

Keep receipts and documentation. If the FSA administrator questions whether an expense is covered, you'll need proof of what you bought and why. Some expenses—like a doctor's visit—are obvious. Others, like a specific over-the-counter medication, require documentation that it was prescribed.

Track your spending throughout the year so you don't contribute more than you'll use. If your plan offers a grace period (usually 2.5 months after the plan year ends) or a carryover (typically up to $610 in 2024, though this amount changes yearly), you have a small cushion. Without one, unspent money is forfeited.

FSA contribution limits and tax savings

The IRS sets a maximum contribution limit each year. For 2024, the limit is $3,300 for individual coverage. Your employer may set a lower limit. You choose your contribution amount during open enrollment, and that money is deducted from your paycheck before federal income tax, Social Security tax, and Medicare tax are calculated.

If you contribute $3,000 to an FSA and you're in the 22% federal tax bracket, you save roughly $660 in taxes that year. The actual savings depend on your tax bracket and whether your state has income tax. This is why FSAs are valuable even though you lose unspent money—the tax savings often outweigh the risk.

Frequently Asked Questions

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

Yes. An FSA covers medical expenses for you, your spouse, and any dependent children, regardless of whether they're on your insurance plan. You can reimburse yourself for their copays, prescriptions, and other covered costs.

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

You lose access to the account. Any unspent money is forfeited to your employer. Some plans allow you to submit claims for expenses incurred before you left, but only within a short window. Check your plan documents or ask your HR department about the exact important date.

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 insurance, or a significant change in your spouse's benefits. Losing your job or a change in your employer's plan may also may have access to. Outside of these events, you're locked into your contribution for the full plan year.

Do I need a receipt to get reimbursed from my FSA?

Yes. You need a receipt showing what you bought and the amount. For prescription medications, the pharmacy receipt works. For medical equipment or services, you need an itemized receipt. Some FSA debit cards don't require receipts for small purchases, but the FSA administrator can ask for documentation at any time.

Is mental health counseling covered by an FSA?

Yes. Therapy, counseling, and psychiatric visits are covered medical expenses. You can use your FSA to pay your copay or coinsurance for these services, just as you would for any other doctor visit.