If you participate in a Flexible Spending Account (FSA), there may be some qualified FSA expenses you didn’t know about. Learn how you can significantly maximize your FSA spending and benefits in order to reduce your healthcare expenses.
Flexible spending accounts (FSAs) were introduced by the IRS in the 1970s in response to rapidly accelerating healthcare costs. An FSA is a tax-advantaged, employer-sponsored account used to reimburse employees for qualified health care expenses. A key benefit of FSAs is that employee contributions to the account are not subject to payroll or income taxes. Since the average person in the U.S. pays between 20-40% in payroll taxes, they get to keep 20-40% of the money they contribute to an FSA. Or to look at it another way, it’s like they are saving 20-40% on purchases made with their pre-tax FSA funds.
Not surprisingly, FSAs are one of the most popular employer-sponsored benefits in the U.S. In fact, about 44 percent of American workers have access to an FSA.
How Can I Maximize My FSA Spending and Benefits?
If you’re participating in an FSA for the first time, you may be surprised at the wide variety of covered products and services. These include common medical expenses, such as doctor visits, surgery and other medical procedures. An FSA can also pay for prescription medicines, and dental, vision, chiropractic and mental health services. Keep in mind that in order to use your pretax dollars, the healthcare product or service must be considered a qualified expense by the IRS. Otherwise your claim will be denied.
In addition to the “traditional” healthcare expenses, there are other products and services that qualify for FSA reimbursement.
FSA Expenses You May Not Know About
Guide dogs/service animals
FSA plans can reimburse the costs of buying, training, and maintaining a guide dog (or other service animal). The service animal must be used to assist someone with visual, hearing or other physical disabilities. Maintenance costs can include food, grooming, and other veterinary expenses to keep the animal healthy so it can effectively perform its duties.
Braille reading material
You can claim part – but not all – of the costs for purchasing Braille books and magazines for a visually impaired person. Specifically, FSAs will reimburse the difference between the cost of the regular printed edition and the higher cost of a Braille edition.
Auto adaptation expenses
Disabled persons who require hand steering controls and other special equipment in order to drive can claim these as FSA-eligible expenses. These costs can also include the difference between the cost of a regular car and one designed to hold a wheelchair.
Television closed captioning
Most modern TVs include the ability to close-caption as part of their built-in features. However, if your set requires an external adapter to add this visual aid, it qualifies as an FSA expense. In some cases, you can also claim the difference between the cost of a specially equipped television set and one that doesn’t offer closed captioning.
Special telephone equipment
If you or a family member are deaf, hard of hearing, or have a speech disability, you can claim the costs of special equipment that allows you to communicate using a telephone. This includes teletypewriters and other telecommunications devices for the deaf, as well as any repair costs required to keep the equipment in good working order.
If you have lost part or all of your hair due to disease or medical treatment (such as radiation or chemotherapy), you can use your FSA for help. Purchasing a wig qualifies for FSA reimbursement.
Smoking cessation programs
Some costs of a stop-smoking program qualify as FSA medical expenses. Many over-the-counter treatments, like skin patches and nicotine gum, can also count as FSA expenses. Learn more about smoking cessation programs here.
Home improvements, including lead-based paint removal
If you or a dependent is disabled, home improvements (known as capital expenses) that accommodate the disability are FSA-eligible. Modifications include changing door hardware, modifying electrical outlets, widening doorways, installing hand rails in bathrooms, and other alterations. Review the IRS guidelines and use their worksheet to help you calculate reimbursement amounts for such costs.
The cost of removing lead-based paint from your home is also listed as a qualified expense, with the following conditions:
- Removal prevents a child who has or had lead poisoning from eating the paint
- The surfaces have peeling, cracking or flaking paint
- A child can easily reach the lead paint. Note, you can’t claim paint removal from a ceiling.
Expenses for repainting the scraped area (labor and paint) do not qualify as a medical expense. However, covering the leaded area with wallboard or paneling instead of removing the paint qualifies as a capital expense.
Transportation costs to and from medical care qualify as eligible expenses. These include bus, taxi, train and air fares, ambulance service and any costs incurred by a parent who must take their child to medical care. Adults unable to travel alone can also claim transportation costs for a nurse or other person who can give injections, medications, or other treatments while on the way to receive medical care. You can also claim transportation costs for regular visits for a mentally ill dependent. The visits must be a recommended part of the treatment for FSA reimbursement.
High-Tech Healthcare Gadgets
Many high-tech healthcare gadgets are eligible for FSA reimbursement. This includes thermometers, blood pressure readers, acne treatments, and pain relief devices, to name a few.
Believe it or not, sunscreen is FSA-eligible. And, is not just a summertime accessory. Ultraviolet (UV) rays do not take a break during the cooler months. If you spend a lot of time in the outdoors, dermatologists recommend wearing sunscreen to protect your skin.
Flu Shots and Vaccinations
The CDC says flu season peaks between December and February. It takes about two weeks for a person’s immune system to respond to the vaccine. So, getting your shot in October or November before it gets really busy is a good idea. Learn more about the benefits of getting a flu shot – and paying for it with pre-tax dollars.
First Aid Supplies
One can never be too prepared, right? You never know when you’ll need first aid or have to give it. FSA-eligible first aid items include kits, bandages, wound cleansers, and wraps for knees, wrists and backs. You can also buy nasal spray, among other supplies.
Baby Care Items
Babies need a lot of love and attention. Help care for your bundle of joy with saline nasal sprays, gas and colic relief supplies, nasal bulbs, and baby movement monitors.
These are just a handful of suggestions for FSA spending. There are so many ways to use FSA funds. The more you know about eligible FSA expenses, the more money you can save. For a full list of FSA-eligible expenses, see IRS Publication 502 or consult your FSA administrator.
DataPath, Inc. creates high-tech, cloud-based administrative solutions for FSA account management.