An FSA pays for out-of-pocket health costs with untaxed money: deductibles, copayments, coinsurance, prescriptions, some over-the-counter items, and everyday health products like first-aid supplies, sunscreen, contact solution, period products, and pain relievers.
The catch is use-it-or-lose-it within the year, with only a possible two-and-a-half-month grace period or $660 carryover as relief, so do not overfund it. Not eligible: insurance premiums, cosmetic work, gym memberships. The exact list is set by IRS rules and your plan administrator; check it before a big shop.
What to do
Common questions
What can I buy with my FSA?
More than most people think, tax-free. The mechanics first: HealthCare.gov explains an FSA is a special account you put money into to pay for certain out-of-pocket health care costs, and you do not pay taxes on this money, so you save whatever your tax rate would have taken. The big categories: deductibles, copayments, and coinsurance for medical, dental, and vision care; prescription drugs and some over-the-counter items; and everyday health products, a list that has grown to include things like first-aid supplies, sunscreen, contact lens solution, period products, and pain relievers, though the exact eligible list is set by IRS rules and your plan administrator, so check the list before assuming. The rules that bite: FSA money is use-it-or-lose-it within the year, softened only if your employer offers a grace period of up to two and a half months or a carryover of up to $660, and HealthCare.gov advises not putting in more than you will spend in a year. What you cannot use it for: insurance premiums, and cosmetic procedures or general wellness items like gym memberships. The December classic: glasses, contacts, dental work, and stocked-up supplies, all legitimate. Your plan's eligibility list, usually linked from your benefits portal, is the final word on any specific item.