Ways to spend your FSA money by year’s end

December 17, 2024

Prescription copays are a common way to spend flexible spending account (FSA) money, but there are lots of other options to use so you don't lose the tax-favored funds.

Your most important list this time of year is the one detailing all the Christmas gifts you’ve got to find by Dec. 25. But you also need to make another for flexible spending account eligible items you need to buy by Dec. 31.

A medical flexible spending account, or FSA as it’s usually referred to, is workplace benefit that allows you to set aside some pre-tax money from each paycheck. Then you can use those funds, tax-free, to pay for qualifying health-related expenses.

But in many cases, the FSA money must be spent by the end of the benefits year. For most, that’s the end of the calendar year.

Some companies allow employees to carry forward a portion of their unused FSA money into the next year. Others offer a grace period that lets you spend the funds by March 15.

But if neither option is available, you must spend your FSA funds by Dec. 31 or you lose the money.

So that you don’t waste your FSA dollars, here are some items you might want to put on your FSA to-buy list.

Take care of tooth trouble. Even if your workplace health coverage includes dental expenses, these procedures often have a large deductible. If you haven’t met yours yet, schedule a dental visit so that you can use some FSA money to cover the costs.

This could be for that routine cleaning you’ve been putting off because, well, dentist, to getting that filling you’ve been self-treating with over-the-counter pain killers. You’ll enjoy Christmas dinner more if you take care of before the big meal.

Other dental expenses that could qualify range from fluoride treatments to root canals to your youngster's orthodontic needs also are covered here. Yeah, a visit to the dentist is not a fun way to wrap up a year, but it's a good way to take care of your teeth and use up your FSA funds.

Examine eye care options. Basic vision needs generally aren't covered by workplace medical plans, but FSA funds can fill this gap. You can use the account money to buy prescription contacts, reading or regular glasses, or even sunglasses. Note, however, the prescription requirement. You can't just pick up a pair of cheap off-the-drugstore-display shades to look as cool as ZZ Top.

You also can use FSA money to pay for equipment and materials required in connection with your contacts that help you get a 20-20 view, such as saline solution and enzyme cleaner. Or if you want to finally do away with the daily contacts routine and opt for laser vision correction surgery, that’s covered, too.

Prepare for emergencies. While most accidents don’t necessarily happen at home, despite the old saying, your abode can sometimes be treacherous. That’s especially true during the holidays, when routines are disrupted and the house is full of people who are unfamiliar with the layout or simply just getting in each other’s way. So be prepared, during the holiday season and year-round, by using your FSA funds to buy emergency supplies.

The easiest option here is a well-stocked first aid kit. It can help you take care of minor scrapes, like paper cuts from wrapping paper, to slight but painful burns when you picked up, sans potholder, the still-hot pie plate.

If you do need professional emergency treatment, your FSA money also can help cover hospital ER or urgent care visits, ambulance services to those facilities, and wheelchairs and slings if the accident was temporarily incapacitating.

Photo by Kay Bell

Stock up on everyday illness items. If you want to build your own first aid kit, most of the supplies — bandages and Band-Aids, antiseptics, antibiotic creams, and the like — are available from at your local grocery or pharmacy. A tax law change in 2011 to the Affordable Care Act (ACA), still known as Obamacare, made over-the-counter medications once again FSA eligible.

In addition to treating accident-caused injuries, the change means you can use FSA money for such items as pain relievers, cough and cold meds, thermometers, sleep aids, and digestive relief products.

Mind your mental health. For some, this is not the season to be jolly. The holidays can bring up painful memories or put people together in tense situations. If your health care insurance doesn’t cover mental health expenses, you may be able to use FSA funds to cover some of the costs.

The Internal Revenue Service approved list in this area includes services such as therapy, psychologist visits, psychiatric care, and alcoholism treatment. This applies to both in-office and in many cases teletherapy counseling.

Track miscellaneous medical costs. One common medical expense is the cost of prescription medicine. Even if your insurance covers the prescribed medications, you usually face a deductible or copay. You can use your FSA money to pay these amounts.

The miles traveled to and from appointments, as well as the cost of tolls and parking, also can be reimbursed by your FSA. For the 2024 tax year, that’s a rate of 21 cents per mile.

Be sure to keep good records of these medical miles so you can verify any travel expense. Both the IRS and your FSA administrator accept travel costs only if they are in connection with medically necessary treatments and appointments.

Confirm allowed FSA expenses. The medically necessary caveat generally nixes such treatments as cosmetic surgery not related to a doctor’s diagnosis of a medical condition or dental procedures such as teeth whitening.

Many retailers help you identify FSA-eligible items by notating them on store shelves and even highlighting them on the register receipt. They also list the products on their websites.

But the best way to find out what is covered by your FSA is to check with your plan’s administrator. That office usually has a list of what it will, and won’t, reimburse.

You can, of course, go straight to the source and review the IRS’ official documentation of allowable medical expenses, which generally are those that also can be claimed as itemized medical expenses on Schedule 1. The complete list is also known as IRS Publication 502.

And you also can check out the ol’ blog’s prior FSA expenditure posts, including —

Whenever your FSA spending deadline is, either by Dec. 31 or the first quarter of next year, make sure you meet it. You definitely don't want to waste those dollars.