What qualifies for FSA spending is a common question among employees who are eligible for Flexible Spending Accounts (FSAs). FSAs are tax-advantaged accounts that allow individuals to set aside pre-tax dollars to pay for qualified medical expenses. Understanding what qualifies for FSA spending can help employees make the most of their benefits and save money on healthcare costs.
Flexible Spending Accounts, also known as Flexible Spending Arrangements, are employer-provided plans that offer employees the opportunity to allocate a portion of their salary to an account specifically designated for healthcare expenses. This includes not only medical expenses but also dependent care costs. The primary advantage of FSAs is that the money contributed to these accounts is not subject to federal income tax, Social Security tax, or Medicare tax, which can result in significant tax savings for eligible participants.
When it comes to what qualifies for FSA spending, the list of eligible expenses is quite comprehensive. Here are some of the most common categories of expenses that are typically covered by FSAs:
1. Prescription medications: Any prescription drugs or medications prescribed by a healthcare provider are eligible for FSA spending. This includes both over-the-counter and prescription medications.
2. Medical supplies: Items such as bandages, crutches, and eyeglasses are considered eligible medical supplies for FSA spending.
3. Doctor visits: Out-of-pocket costs for doctor visits, including co-pays and deductibles, can be paid for with FSA funds.
4. Prescription eyewear and contact lenses: Expenses for prescription eyewear, such as glasses and contacts, are eligible for FSA spending.
5. Prescription dental care: Out-of-pocket costs for dental services, such as cleanings, fillings, and braces, can be covered by an FSA.
6. Dependent care: FSAs can also be used to pay for dependent care services, such as child care or adult day care, for eligible dependents.
7. Health insurance premiums: Some FSAs may allow for the payment of health insurance premiums, depending on the specific plan and employer’s rules.
It is important to note that while these expenses are generally eligible for FSA spending, there are certain limitations and restrictions. For example, over-the-counter medications are only eligible if they are prescribed by a healthcare provider. Additionally, FSAs have a “use it or lose it” rule, meaning that any funds not used by the end of the plan year must be forfeited.
Employees should consult their employer’s specific FSA plan details to determine the exact list of eligible expenses and any limitations that may apply. By understanding what qualifies for FSA spending, employees can make informed decisions about how to allocate their pre-tax dollars and potentially save money on their healthcare costs.
