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Use it or lose it: Smart last-minute FSA purchases

4 minute read
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Need to spend that flexible spending account (FSA) money before it vanishes? Here’s what to consider — and what not to buy, too. 

Elizabeth Millard

By Elizabeth Millard

Having a flexible spending account (FSA) can be helpful for covering health care or dependent care expenses: Because the funds are withheld from your paycheck before taxes, you aren’t taxed on the amount you contribute.

FSAs let you to choose how much to put in — up to $2,750 per individual, and even more for dependent care — but there’s a catch: If you overestimated the amount that you’d need at the beginning of the plan year, those remaining funds will likely disappear on Dec. 31, unless your employer allows you to roll them over into 2022.

If you have to use them up pronto, what can you buy? Here’s what experts suggest, along with important caveats about how FSA funds can’t be spent.

FSA eligible: Medical supplies

The main rule with FSA purchases is that they must be used for “qualified medical expenses,” but that encompasses a broader range of products and services than you might think, according to Paul Sundin, CPA. He is a tax strategist for Estate CPA, based in Chandler, Arizona.

“Right now, the best items for your FSA money are medical-related supplies,” he says. “And remember that those supplies don’t have to be only for you; they can also cover your spouse and dependents.” According to Sundin, those might include:

If you have kids at home, this is a great time to stock up on supplies that run that gamut of needs, from lotions that prevent diaper rash to children’s sunscreen.

Even some products that might seem indulgent may qualify, says New Jersey–based Jenna VanLeeuwen, CFP, a financial planner for Aligning Wealth, a financial services advisory firm. “One of my favorite ways to use up FSA dollars is to buy high-quality facial sunscreens,” she says. “Tinted moisturizers with SPF do not qualify, but facial sunscreens without tints are FSA-eligible. However, the sunscreen must be SPF 30 or greater to qualify.”

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FSA eligible: Over-the-counter medication for a specific condition

If you have a health condition such as allergies or an occasional cold that is eased by over-the-counter (OTC) products (e.g., antihistamines or decongestants), those are covered by FSA funds. That applies to a wide variety of issues, from heartburn to hemorrhoids to pain relief. For example, you can buy:

Not sure which OTC medication is right for your condition? Schedule a virtual appointment with a doctor now to get expert guidance.

Because FSA money must be for a condition, you can’t use the funds for general wellness products such as vitamins, herbs or other supplements. One exception: vitamins and minerals you’ve been directed by your doctor to take, Sundin says. But you will need to submit a “letter of medical necessity,” completed by your doctor. Prenatal vitamins are also covered.

FSA eligible: Treatments and exams

In addition to products, don’t forget about FSA-eligible services such as dental treatment. Braces, fillings, teeth cleanings and extractions all count. This might be the perfect time to get a full set of x-rays, if you’ve been putting that off. However, anything cosmetic — such as teeth-whitening sessions — is not eligible.

Similarly, think about vision care, suggests Sundin. Your FSA funds cover eye exams, as well as glasses, prescription sunglasses, contact lenses and some procedures.

You can use FSA funds for other services as well, such as:

  • Acupuncture
  • Chiropractic care
  • Drug addiction or alcoholism treatment
  • Flu shots
  • Midwife services
  • Orthodontics
  • Physical therapy
  • Speech therapy
  • Smoking cessation programs
  • Vaccinations

There are some other surprising services that can be FSA eligible, as long as you have that letter of medical necessity, completed by your doctor, that we mentioned earlier. These include massage treatments for a specific ailment or weight-loss treatments tied to diseases such as hypertension and diabetes.

Ineligible expenses include aromatherapy, health club memberships, hair-growth supplies and any cosmetic procedures.

And if you still have unused 2020 FSA funds, you may be in luck. Thanks to the 2020 COVID-19 Economic Relief Bill, any unused 2020 FSA dollars can be used through Dec. 31, 2021, if your employer approves it. Companies may also allow employees to roll over FSA funds into 2022. Check with yours to find out. Happy, healthy shopping.

Whether you’re looking for specific products or just want to browse options, head to the Optum Store to find a wide variety of FSA-eligible products.

Additional sources
Eligible expenses and FAQs: Optum Bank. Common FSA Eligible/Ineligible Expenses and FSA FAQs.
FSA guidelines: Using a Flexible Spending Account.
IRS updates: New Law Provides Additional Flexibility for Health FSAs and Dependent Care Assistance Programs and Additional Relief for Coronavirus Disease Under 125 Cafetria Plans.
American Rescue Plan: Society for Human Resources Management (SHRM). Stimulus Act Raises Dependent Care FSA Limits, Adjusts Tax Credit.
Carryovers: Society for Human Resources Management (SHRM). IRS Clarifies Relief for FSA Carryovers.