Health Care Flexible Spending Account Expenses*
What is it?
A Health Care FSA is a spending account set up through your employer that allows you to pay for many out-of-pocket medical expenses with tax-free dollars. Approved expenses include insurance copayments and deductibles, qualified prescriptions, insulin, medical devices, and more. The annual limit is set by the IRS each year and you decide how much to contribute to your account. If money is left at the end of the year, it is forfeited, unless the employer allows you to carry over an IRS approved amount to spend the next plan year.
What are Medical Expenses?
Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and for the purpose of affecting any part or function of the body.
What does it include?
These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes.
What isn't included?
Medical care expenses must be primarily to alleviate or prevent a physical or mental disability or illness. They don't include expenses that are merely beneficial to general health, such as vitamins or a vacation. You should review your company's plan documents and check with the plan sponsor to understand what is covered.
Examples of Covered Health Care FSA Expenses*
- Acupuncture
- Alcoholism Treatment
- Annual Physical Exam
- Artificial Limb
- Artificial Teeth
- Bandages
- Birth Control Pills
- Body Scan
- Braille Books and Magazines
- Breast Pumps and Related Supplies, including Lactation Expenses
- Breast Reconstruction Surgery, including Breast Prosthesis
- Capital Expenses from Medically Related Home Improvements/Safety Equipment Installation
- Chiropractor
- Christian Science Practitioner
- Contact Lenses
- Crutches
- Dental Treatment
- Dentures
- Diagnostic Services
- Disabled Dependent Care Expenses
- Drug Addiction Treatment
- Eye Examination and Eyeglasses
- Eye Surgery
- Fertility Enhancements
- Guide Dog or Other Service Animal
- Health Institute Treatment
- Health Maintenance Organization (HMO) Premiums
- Hearing Aids
- Home Care
- Hospital Services
- Laboratory Fees
- Legal Abortion
- Lead-Based Paint Removal
- Legal Fees (in limited circumstances)
- Lodging
- Lifetime Care - Advance Payments
- Long-Term Care
- Meals
- Medical Conferences
- Medicines, Prescribed
- Nursing Home
- Nursing Services
- Operations
- Osteopath
- Oxygen
- Pregnancy Test Kit
- Psychiatric Care
- Psychoanalysis
- Psychologist
- Special Education
- Special Home for the Intellectually and Developmentally Disabled
- Sterilization
- Stop-Smoking Programs and Medicines
- Telecommunications for the Deaf or Hearing Impaired
- Therapy
- Transportation for Medical Care
- Vasectomy
- Weight Loss Program Necessary to Treat a Specific Medical Condition
- Wheelchair, Walkers, Crutches, and Canes
- Wigs (to treat alopecia due to a medical condition)
- X-Rays
FSA in Use
The amount that you choose comes preloaded on a debit card at the beginning of your plan year, which allows you to use it for medical procedures/services and approved expenses. In order to fund the FSA, the money is taken out of your pay incrementally before taxes each pay period, e.g. if you elect $2,000 for your Flexible Spending Account and you are paid biweekly, then $76.92 will be deducted from each of your 26 pay periods for the year.
For example, Jennifer enrolled in the FSA and added $3,000. She received her preloaded FSA debit card at the beginning of the plan year with the $3,000 on it. She scheduled a dental treatment and used her card to pay for it. At the end of the year, she still had $200 left on her FSA debit card which she used to buy contact lenses.
Child and Dependent Care Flexible Spending Account Expenses**
What is it?
A Dependent Care FSA is a pre-tax benefit account used to pay for eligible dependent care services such as preschool tuition, summer camp, after school programs, as well as child or adult daycare. It is simple way to save money while taking care of your loved ones so that you can continue to work.
You may reduce your overall tax burden as funds are withdrawn from your paycheck for deposit into your account before taxes are deducted.
What are work-related expenses?
Child and dependent care expenses must be work-related to qualify for the credit. Expenses are considered work-related only if both of the following are true:
- They allow you (and your spouse if filing jointly) to work or look for work
- They are for a qualifying person's care
Examples of Covered and Dependent Care FSA Expenses**
Care for your child who is under age 13
- Qualified childcare centers
- Before and after school programs
- Babysitting and nanny expenses
- Daycare, nursery school, and preschool tuition
- Summer day camp
Care for your spouse or a relative who is physically or mentally incapable of self-care and lives in your home
- Adult daycare facilities
- Custodial elder care
- Eldercare at home
Limited Purpose Flexible Spending Account Expenses*
What is it?
When offered by your employer, this flexible solution helps you to maximize tax savings for health expenses. You may pair an eligible Health Savings Account (HSA) with a Limited Purpose Flexible Spending Account (LPFSA) for the purpose of covering certain health expenses.
When paired with an HSA, LPFSAs are limited in use to dental and vision expenses only. These accounts allow you to maximize tax savings while preserving your HSA balances for growth.
Examples of Covered Limited Purpose FSA Expenses*
- Dental deductibles, copays, and coinsurance
- Vision deductibles, copays, and coinsurance
*See IRS Publication 502 for a complete list of covered expenses at www.irs.gov.
**See IRS Publication 503 for a complete list of covered expenses at www.irs.gov.