What is a flexible spending account, or FSA?
As the year winds down and open enrollment begins, it’s a great time to look at your flexible spending account. FSA stands for flexible spending account. It allows you to use pre-tax money (saving you on taxable income) for healthcare.
You choose the amount you wish to have withheld from your paycheck, reducing your income before taxes. Without an FSA, everything you pay for healthcare comes from your after-tax money. Your employer may even encourage you to use an FSA with contributions to the account.
Keep track of your healthcare expenses
When you enroll for an FSA, you will need to keep track of all of your receipts and expenses for reimbursement. It is also possible that your FSA uses a debit card so that you can pay for expenses as you go. You can use your account to cover costs for you and your family. Keeping track of your receipts is wise, even if you have a debit card.
FSA and the “use it or lose it”
Flexible spending accounts are similar to health savings accounts and health reimbursement accounts. However, FSAs do not roll over year-to-year; you may lose your unused funds. For any unused funds, your employer may offer one of two options to you (it can’t be both):
- You have a two-and-a-half-month grace period for you to use the excess funds.
- Or, for 2022, up to $570 of unspent funds may carry over if they are in your FSA. In 2023, the amount will increase to $610.
How to spend your flexible spending account, or FSA
A flexible spending account cannot cover your insurance premiums. However, you may use it to pay for co-payments, deductibles, prescriptions, medical care, vision care, and dental care. Here is a list of other things you may not realize that your FSA covers:
- Sunscreen: If you’re looking to hit the beach or spend some time in the sun, you can use your FSA dollars on sunscreen. Get SPF 15 or above; the weakest stuff won’t cut it. If you forget to reapply, aloe is reimbursable, too.
- Vitamins: You can only get vitamins with your FSA if your doctor prescribes them, but they are generally not covered. Prenatal vitamins are an eligible expense if you or someone in your household is pregnant.
- Eye care: Eye exams are eligible for FSA expenses. All the things that come after the exam are qualified expenses, including prescription eyeglasses, prescription sunglasses, reading glasses, contacts, and contact solutions.
- Chiropractor: Getting your body adjusted by a professional is a reimbursable expense.
- Dental treatment: The dental work you keep rescheduling or putting off is an eligible expense, but purely cosmetic work is not.
- Testing supplies: Any diagnostic testing supplies for any health condition are eligible for reimbursement.
- Menstrual care products: pads, tampons, pain relievers, and more are under the FSA umbrella of covered expenses.
- Lodging: Expenses associated with medical care that requires overnight stays, including meals, are eligible.
- Medical conferences: The cost of a conference for a medical condition that you, your spouse, or your dependant has is eligible for reimbursement, but lodging and meals are not.
- Medical remodeling: If someone in your household requires changes to their dwelling for medical accommodations, then you may use your FSA. The same applies to vehicles for disabled persons.
- Special education: If a doctor orders any special education associated with a diagnosis or ondition, it’s covered.
- Cold supplies: Over-the-counter remedies and treatments are eligible for FSA use and no longer require a doctor’s note.
- Weight-loss program: If your doctor recommends weight loss as a treatment for a condition, it’s covered. However, fad diets and “health gurus” do not qualify. It is best to use a registered dietitian, such as St. Louis Magazine’s A-list Reader’s Choice Sarah Williams of Sweet Balance, to ensure you are eligible for reimbursement.
- Fertility assistance: It’s no secret that fertility treatments can add up fast, so using your FSA to help with the expenses is an excellent way to minimize the total cost.
- Acne treatments: Many therapies and skin care treatments are eligible under an FSA; check with your provider and physician first.
- Counseling or therapy: If you need to seek therapy or counseling, you can devise a plan with your healthcare provider and use your FSA to cover the associated costs.
- Hearing loss: Covers hearing aids, cleaning supplies, batteries, and treatments.
- Addiction treatment: Fees, meals, and lodging qualify for FSA reimbursement.
- Bandages: Whether you are accident-prone or someone in your house is, Band-Aids (adhesive strips) are something you can buy with your FSA dollars.
- Crutches: Sometimes accidents require more than Band-Aids, and your FSA covers those, too.
- Heating pads: If you suffer from aches and pains, your doctor may think a heating pad is a good idea for you, which is eligible for FSA reimbursement.
- Acid controllers: Love spicy food but suffer from the after-effects? Your FSA can bail you out.
- Allergy and sinus meds: Over-the-counter medicines are FSA-eligible and no longer need a doctor’s note.
- Breast feeding supplies: pumps, shields, pads, and lactation supplies are eligible for the use of an FSA.
- Electric toothbrush: Has your dentist told you that you brush too hard and need to get an electric toothbrush? They are expensive and covered, but the replacement heads are not.
- Pain relievers: Over-the-counter pain relievers no longer require a doctor’s note or prescription for reimbursement.
How to open your flexible spending account
The FSA limit for 2023 is $3,050, increasing from $2,850. Both you and your spouse can contribute separately. However, you must select the amount you wish to contribute during your employer’s open enrollment. You can only adjust for qualifying events such as marriage or childbirth during the year.
Plan your recurring healthcare expenses
You will want to read through the finer details of your employer’s health insurance to learn all the costs of copays and coinsurance to get a decent idea of how much healthcare will cost you for the year, such as visits to your physician, dentist, and eye doctor. If you have any chronic conditions, such as ADHD, asthma, diabetes, etc., that require ongoing treatment or medications, you will also want to plan for those expenses.
You can use your flexible spending account for various costs, but remember, you could lose any unused funds. Proper planning can help you save quite a bit on your taxes while you receive the healthcare you need.