How to Maximize Your Healthcare FSA Spending and Benefits

FSA spending; doctor visitIf you already have a healthcare flexible spending account, or FSA, you know that it’s a powerful financial tool for reducing your healthcare costs. Yet, you may still be wondering, “How can I maximize my FSA spending?”. Learn how you can significantly maximize your FSA spending and benefits in order to reduce your healthcare expenses.

In response to rapidly accelerating healthcare costs, the IRS introduced FSAs in the 1970s. These employer-sponsored plans allow employees to set aside a certain amount of money with each paycheck to help pay for qualified medical expenses. The primary advantage of an FSA is the ability set aside the money pre-tax. As a result, individuals and families can reduce out-of-pocket healthcare expenditures between 20 to 40 percent.

Not surprisingly, FSAs are one of the most popular employer-sponsored benefits in the U.S. Approximately one out of five Americans currently take advantage of their companies’ FSA benefit, and the numbers are growing every year.

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 medical, dental and health-related products and services that are covered. These include common medical expenses, such as doctor visits, surgery and other medical procedures, 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.

You may also be surprised to learn that approved FSA expenses cover a lot more than just basic medical and healthcare items. Other qualified products and services include:

FSA spending ; Guide dogGuide dogs/service animals. 

FSA plans reimburse the costs of buying, training, and maintaining a guide dog (or other service animal) as long as they are used to assist people 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 purchase price 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 you own an older set that requires an external adapter to add this visual feature, you can include it as a medical expense. In some cases, you can also claim the difference between the cost of a specially equipped television set and that of the same model television set 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.

Wigs.

If you have lost part or all of your hair due to disease or medical treatment (such as radiation or chemotherapy), purchasing a wig qualifies for FSA reimbursement.

Smoking cessation programs.

The costs of a stop-smoking program qualify as FSA medical expenses, but not any over-the-counter treatments that may be part of the program’s treatment process. FSAs cannot reimburse for skin patches, nicotine gum, or other stop smoking products unless they are prescribed by a physician. Learn more about smoking cessation programs at www.tobacco-cessation.org/resources/programs.

Home improvements, including lead-based paint removal. 

If you or a dependent is disabled, home improvements (known as capital expenses) that accommodate the disability qualify as FSA-eligible expenses. 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 (i.e. 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; covering the leaded area with wallboard or paneling instead of removing the paint qualifies as a capital expense.

Transportation.

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 to a mentally ill dependent; the visits must be a recommended part of the treatment.

Eligible FSA expenses also include many over-the-counter products, ranging from everyday medicines to eye drops, athletic bandages and more. So don’t automatically assume a medical expense isn’t qualified just because it seems unusual. For a complete list of FSA-eligible expenses, see IRS Publication 502 or consult your FSA administrator.

Use it or Lose It: End-of-Year FSA Spending Ideas

Calendar (End of Year FSA spending)For many years, the one disadvantage of an FSA is that you either use or lose the money. That means you must spend all the funds in your account by the end of the year or forfeit the unused portion. Some plans also offer a grace period of up to two and a half months use any remaining balance; any unused dollars after the grace period expires are forfeited.

Fortunately, the IRS recently eased up on this requirement. Now you can “carry over” up to $500 to the next year – as long as your employer’s plan allows it. (If you’re not sure, check with your plan administrator.)

Another bonus of the rollover option – if you roll over the full $500, you can still elect the maximum contribution of $2,650 for next year. If you have funds sitting unused in your account and no plans to spend them, take advantage of the rule.

If your employer’s plan does not allow the rollover option and you haven’t yet spent all your pre-tax FSA dollars, the clock is ticking on 2017!

Here are some suggestions for qualified end-of-year FSA spending:

Go high-tech.

With your FSA, you can replace your home healthcare gadgets. This includes thermometers, blood pressure readers, acne treatments, and pain relief devices, among other gear.

Protect your skin.

Believe it or not, sunscreen (which is FSA-eligible) 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 during the fall and winter, dermatologists recommend wearing sunscreen to protect your skin.

Take care of your eyes.

Eye care is important and many eye care expenses are FSA-eligible. You can pay for eye exams, prescription glasses or contact lenses, and vision correction surgery. Believe it or not, contact lens solution, prescription sunglasses and over-the-counter reading glasses are also eligible medical expenses.

Visit the dentist.

You can use your FSA funds to help with the cost of co-pays for a dentist visit. Plus, if you or a dependent need orthodontics such as braces or other treatments, those are covered too.

Make a doctor’s appointment.

Do you need to see the doctor? Have you been putting off a visit? Doctor co-pays and deductibles are on the list of eligible medical expenses, as are the cost of laboratory fees.

Get your flu shot.

Flu Shot FSAThe CDC says flu season peaks between December and March. It takes about two weeks for a person’s immune system to respond to the vaccine, so now is prime time to protect yourself against the flu virus. Learn more about the benefits of getting a flu shot – and paying for it with pre-tax dollars.

Fill your prescriptions.

If you received a new prescription, or need to refill current ones, use your FSA funds to pay for them.

Refill 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, nasal spray, and wraps for knees, wrists and backs, among other supplies.

Get diabetes supplies, including insulin.

Good news for people with diabetes: you can purchase insulin, syringes, glucose monitors, glucose tablets, test strips, and sharps containers with an FSA.

Stock up on 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 end-of-year FSA spending; there are thousands of ways to use FSA funds.

If you’re not sure whether your employer offers an FSA plan, ask your HR administrator. If the plan is available, take advantage of it as an FSA can save you a lot of money.

Even if you rarely visit the doctor, why not pay for the costs with pre-tax money? It’s simple to enroll in a flexible spending account and easy to submit claims for reimbursement. (Some plans allow automatic reimbursement for certain types of medical expenses without having to submit a claim.) FSAs are one tax deduction the IRS absolutely got right.

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