What You Can Use Your HSA or FSA For
Maximize your tax-free healthcare savings with Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs). Learn how to use your funds wisely, from copayments to unexpected expenses, and discover a wide range of eligible items.
Flexible spending accounts (FSAs) and health savings accounts (HSAs) are a great way to put aside money tax-free to pay for out-of-pocket medical costs. Many people use the money in their accounts for copayments, deductibles, and co-insurance. But you are not limited to just that – there’s a surprisingly wide variety of things you can use your FSA or HSA to pay for.
In this article, we’ll give you some examples of ways to spend your FSA or HSA money, without risking getting in trouble with the Internal Revenue Service (IRS). We’ll also show you how to find out if something you’d like to buy is an acceptable FSA or HSA expense.
How FSAs and HSAs Work
FSAs and HSAs are both designed to help you pay for health care costs. There are some key differences:
- FSAs are offered by employers as an employee benefit. Employees decide how much to contribute to the FSA, which is deducted from their gross pay. Employers may also contribute. Employees submit claims for their expenses, with receipts and other documentation, and get reimbursed. The balance in the FSA generally doesn’t carry forward to the next year, although employers can offer a brief grace period to spend leftover money.
- HSAs are available to anyone who has an HSA-eligible health plan, which must be a high-deductible health insurance plan. Each year, you decide how much to contribute to your HSA, up to the limit set by the federal government. Employers may also contribute. You spend money from your HSA directly, writing a check or using a debit card linked to the account. The balance in the HSA rolls over from year to year.
Qualified Medical Expenses
Money in either an HSA or an FSA can be withdrawn tax free to pay for qualified medical expenses. So, what’s considered a qualified medical expense?
According to the IRS, it’s something that would generally qualify for the medical and dental expenses deduction on your federal tax return. The IRS says that 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.” Medical expenses include payment for services provided by physicians, dentists, and other medical practitioners. They also include the costs of equipment, supplies, and diagnostic devices.
Deductible medical expenses must be primarily to alleviate or prevent a physical or mental disability or illness, the IRS says. They don’t include things that are beneficial to general health, such as vitamins or a vacation.
IRS Publication 502 has a detailed list of medical expenses that can be deducted, and a list of expenses that can’t be included in the medical expense deduction. You may already be familiar with these if you itemize your deductions. If you don’t itemize, it’s still worth taking a look to learn more about what the IRS considers to be medical expenses.
While Publication 502 provides some guidance on what you can and can’t spend your FSA/HSA money on, there is a better way that is easily accessible.
Banks, credit unions, or other financial institutions are typically HSA trustees, designated to administer the accounts. Employers contract with companies, including banks, credit unions, insurers, and payroll managers, to set up and administer their FSAs.
Some of these companies maintain on their websites lists of qualified medical expenses for the HSAs or FSAs they administer. So, accessing these lists is a good way to find out what is OK to spend the money on.
- Determine the name of the company that administers your FSA or HSA. It will probably be on an account statement that you’ve received.
- Visit the company’s website and look for information on HSA or FSA spending. You may have to use the website’s search function. Alternatively, you can use a search engine like Google to locate the information.
- See if the company publishes a list of qualified medical expenses. If not, take a look at lists published by other administrators, which you can find by searching for HSA or FSA “eligible expenses list.”
If you have one of our MyMoney HSAs, we have posted a list of eligible expenses that you can look at. The list is alphabetical and it is also searchable. The list tells you if something is eligible or potentially eligible (when certain requirements are met). The list also covers items that are ineligible. Please note that if you have a health reimbursement arrangement (HRA), the list is not applicable as the eligible products and services are determined by the employer that offers the HRA.
According to the MyMoney list of eligible expenses, here are some things that you can spend your HSA or FSA money on:
- Abdominal supports
- Birth control pills (valid prescription required)
- Breast pumps
- Cotton balls (sterile)
- Ear wax removal kits
- Embryo, egg, and sperm storage fees
- Eyeglasses and contact lenses
- First aid kits
- Heating pads
- Menstrual pain relievers
- Nutritional consultation
- Orthopedic inserts
- Pregnancy test kits
- Sleep aids and sedatives
- Sunscreen (SPF 15 or higher)
- Transportation for medical care (with documentation)
- Varicose vein treatment
- Wrist and joint supports
This list is not complete, so be sure to check the full list for other eligible expenses. Additional items are potentially eligible, if a letter of medical necessity from a health care provider is obtained.
What’s Not Eligible?
There are some things you may think are health expenses, but they are ineligible for HSA or FSA spending, according to the MyMoney list. They include:
- Antiperspirant or deodorant
- Cosmetics and hygiene products
- Dental floss
- Diapers or diaper service
- Diet foods
- Electrolysis or hair removal
- Face creams
- Hair colorants
- Hand/skin lotion
- Marriage counseling
- Maternity clothes
- New parent/newborn child care classes
- Shaving cream
- Tanning salons
- Teeth whitening
This list is not complete, so please check the full MyMoney list for additional ineligible items. It’s worth making the effort to determine if an item is ineligible, because if you withdraw money from your HSA or FSA for non-eligible expenses, you will have to pay taxes on the money withdrawn and may be subject to a 20 percent penalty.
Keep The Receipts
It’s important to keep good records about how you spent your HSA or FSA money. Always keep receipts, letters of medical necessity, and other documentation, as this will help you prove that your HSA or FSA withdrawals were for eligible medical expenses.
We hope this article has been helpful in giving you some ideas for spending your HSA or FSA money. If you have a question about whether a specific item or service is a qualified medical expense, it’s best to contact your HSA or FSA administrator. If you have a MyMoney account, please call customer service at 1-866-999-2605.