Maximizing Your FSA Benefits: A Comprehensive List of Eligible Medical Expenses and Spending Deadlines

Tax-advantaged financial instruments like Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) are a beacon of light for employees across the United States. These accounts, which provide substantial tax benefits, allow individuals to cover qualified medical expenses with pre-tax dollars.

However, FSAs come with a critical caveat: the ‘use-it-or-lose-it’ rule, mandating that unspent funds are forfeited by a designated deadline set by your employer. HSAs, on the other hand, have no such deadlines, allowing you to accumulate savings over time.

To help you make the most of your FSA and HSA eligible medical expenses while minimizing losses, this comprehensive guide will cover common, recently new, and surprising ways to spend your funds. Additionally, we’ll review essential steps in navigating your FSA’s use-it-or-lose-it rules and spending deadlines.

Know Your FSA Rules: Employer-specific Guidelines and IRS Regulations

Familiarize yourself with the specific FSA guidelines set by your employer. While general FSA regulations are provided by the Internal Revenue Service (IRS), individual plans may vary. Key points to note include:

1. Annual contribution limits, which cap at $2,750 for 2021 and 2022, and $2,850 for 2023 and 2024.
2. The grace period during which you can use up leftover FSA funds from the previous year, if offered by your employer.
3. Carryover limits (if applicable), allowing up to $570 of unused FSA balances to be rolled over to the next plan year.
4. Eligibility for dependents, including spouses, as long as they are claimed on your tax return.

Common HSA & FSA-Eligible Qualified Medical Expenses

Here’s a shortlist of some typical health expenses covered by both HSAs and FSAs:

1. Doctor visits, including general practitioners, specialists, and chiropractors
2. Prescription medications
3. Dental care (e.g., check-ups, cleanings, x-rays, fillings)
4. Vision care (e.g., eye exams, glasses, contact lenses)
5. Hospital services (e.g., inpatient and outpatient care, ER visits)
6. Medical equipment (e.g., crutches, wheelchairs, oxygen tanks)
7. Copays, coinsurance, and deductibles

Newly Eligible HSA & FSA-Eligible Qualified Medical Expenses

As the healthcare landscape evolves, some costs that were once ineligible are now covered by HSAs and FSAs:

1. Menstrual care products (e.g., tampons, pads, menstrual cups)
2. Acupuncture treatment
3. Over-the-counter medications (with a prescription)
4. Female breast pumps
5. Infertility treatments
6. Diabetes self-management training
7. Breastfeeding supplies (e.g., breast pumps, milk storage bags, nursing bras)
8. Telehealth services and remote medical consultations
9. COVID-19 related expenses not covered by insurance (e.g., testing kits, treatment)

Surprising HSA & FSA-Eligible Qualified Medical Expenses

Uncovering the less apparent medical costs that can be covered with your HSA or FSA funds is key to maximizing savings and minimizing forfeiture:

1. Smoking cessation products (e.g., nicotine patches, gum)
2. Hearing aids, exams, and batteries
3. Therapy services (e.g., physical therapy, occupational therapy, mental health counseling)
4. Medical transportation expenses (e.g., ambulance service, taxi rides to medical appointments)
5. Weight-loss programs recommended by your doctor for specific medical conditions
6. Guide dogs and other service animals
7. Wigs after medical hair loss due to chemotherapy or similar treatment
8. Fertility preservation services (e.g., sperm/egg freezing, storage)
9. Alcoholism and drug addiction rehabilitation

Navigating the ‘Use-It-or-Lose-It’ Rule: Steps for Maximizing Your FSA Benefits

To avoid losing unspent funds in your FSA account, consider these strategies:

1. Estimate annual expenses – Forecast your medical and dental needs throughout the plan year. This will help you determine a realistic contribution amount to minimize waste.
2. Enroll in a grace period or carryover option if available – Some employers offer a limited grace period to use leftover FSA funds from the previous year, while others allow a small rollover of balances. If these options are unavailable, maximize your usage within the plan year.
3. Claim reimbursements promptly – File reimbursement claims for eligible expenses as soon as possible to avoid incurring interest charges on your account.
4. Keep track of expenses with an FSA debit card or app – Using a dedicated FSA debit card can ensure accurate tracking of expenditures, and some employers provide apps for easy expense management.
5. Review your account regularly – Monitor the balance in your FSA account throughout the year to stay abreast of spending and prevent unexpected losses.
6. Seek guidance from your employer or plan administrator – They can offer tailored advice on maximizing your FSA benefits based on your individual situation.
7. Plan ahead for upcoming medical events – Schedule dental cleanings, vision exams, and other regular health check-ups during the plan year to leverage eligible expenses.
8. Request reimbursement extensions in cases of medical emergencies – If you’ve reached the end of your plan year and need additional time to submit claims for significant expenses, request a grace period from your employer.

By following these steps and staying informed about FSA-eligible medical expenses, you can maximize your tax savings and avoid the ‘use-it-or-lose-it’ trap. Remember, if your employer offers an HSA, you can enjoy the added flexibility of no spending deadlines, allowing you to accumulate savings for future healthcare needs.