What Your Flexible Spending Account Actually Covers

Dependent Care and Medical Expenses: The Two FSA Categories

A Flexible Spending Account (FSA) covers two separate categories of expenses, and which one you use depends on which FSA you opened. A dependent care FSA pays for childcare, adult day care, and summer camp — expenses that let you work. A medical FSA (also called a healthcare FSA) covers out-of-pocket medical, dental, and vision costs that your insurance does not pay. You cannot use money from one to pay for the other.

The IRS publishes a detailed list of what counts as a may have access to expense for each type. The list is long, but the rule is simple: the expense must be something your insurance does not cover, it must be for you or your tax dependents, and it must be incurred during the year you set aside the money. You cannot go back and reimburse yourself for expenses from last year, even if you did not use your FSA then.

Key Takeaways

• A dependent care FSA covers childcare, adult day care, and summer camp — only expenses that allow you to work or attend school.
• A medical FSA covers copays, deductibles, coinsurance, dental work, vision care, and over-the-counter items like bandages and pain relievers, but not insurance premiums or cosmetic procedures.
• You must use the money within the plan year or lose it; most plans do not let you carry over unused funds to the next year.
• The IRS maintains the official list of covered expenses, and your plan document may be more restrictive than the IRS allows.

What a Medical FSA Covers

A medical FSA covers any out-of-pocket medical expense that your health insurance does not pay. This includes copays when you visit a doctor, coinsurance (your share of the cost after insurance pays its part), and deductibles you have not yet met. It also covers the full cost of services your plan does not cover at all, like acupuncture, chiropractic care, or fertility treatment — as long as a doctor ordered it.

Dental and vision expenses count even if you have separate dental or vision insurance. You can use your medical FSA to pay for fillings, root canals, crowns, orthodontia, glasses, contact lenses, and eye exams. Over-the-counter items are covered too: bandages, pain relievers, allergy medicine, antacids, and cold medicine all may have access to. Prescription medications are covered whether you buy them at a pharmacy or online.

Expenses that do not may have access to include health insurance premiums (you cannot pay your monthly premium from an FSA), cosmetic procedures like Botox or teeth whitening for appearance only, and general wellness items like vitamins or gym memberships. If a procedure is cosmetic but also medically necessary — for example, reconstructive surgery after an injury — it may be covered; your plan administrator can tell you whether yours is.

What a Dependent Care FSA Covers

A dependent care FSA pays only for care that allows you to work or, if you are a student, to attend school full-time. This includes daycare centers, in-home nannies, family day care providers, and after-school programs. The care must be for a child under age 13 or for an adult dependent (a spouse or parent) who cannot care for themselves and lives with you.

Summer camp is covered if it is day camp and you are working during the day. Overnight camp is not covered because it serves a different purpose — it is not enabling you to work. Similarly, babysitting for a night out is not covered, but babysitting during work hours is. Preschool is covered; kindergarten is covered only if you are working and need care before or after school.

You cannot use dependent care FSA money to pay for school tuition itself, only for the care that happens outside school hours. You also cannot use it for care during a vacation week when you are not working, even if you pay the provider to hold your child's spot.

The Use-It-or-Lose-It Rule and Carryover Options

Money you set aside in an FSA must be used by the end of the plan year, or you lose it. This is the most important rule to understand before you open an account. If your plan year runs January through December and you do not spend the money by December 31, that money is gone — your employer keeps it.

Some employers offer a grace period: a two-month or three-month window after the plan year ends during which you can still submit claims for expenses incurred in the prior year. A few employers allow a small carryover — usually $550 or less — into the next year. Check your plan document or ask your benefits administrator whether your employer offers either option. If they do not, you need to estimate conservatively what you will actually spend.

How to Know What Your Specific Plan Covers

The IRS sets the outer boundary of what is allowed, but your employer's plan can be more restrictive. Your plan document — usually called a Summary Plan Description or SPD — lists what your employer has decided to cover. Some employers exclude certain dental procedures, limit vision care to one exam per year, or do not cover over-the-counter medications.

Before you set aside money, read your plan document or call your benefits administrator and ask for a list of covered expenses. If you are unsure whether a specific item qualifies, ask in writing and keep the answer. Your plan administrator can also tell you whether your employer offers a grace period or carryover, which changes how much you should contribute.

Submitting Claims and Keeping Records

To get reimbursed from your FSA, you submit a claim with a receipt or explanation of benefits from your provider. For medical expenses, this is usually a bill from your doctor, dentist, or pharmacy. For dependent care, it is an invoice from your childcare provider showing the dates of care and the amount paid.

Keep all receipts and bills for at least three years. Your plan administrator may ask you to prove that an expense was incurred during the plan year, especially if you submit a claim after the year ends. If you cannot produce documentation, the claim will be denied and you will not be reimbursed.

Frequently Asked Questions

Can I use my medical FSA to pay for my spouse's medical expenses?

Yes, if your spouse is your tax dependent. Most married couples filing jointly can claim each other as dependents. Check your tax return or ask your tax preparer to confirm. If you can claim your spouse as a dependent, you can use your medical FSA for their copays, prescriptions, and other out-of-pocket costs.

What happens to my FSA money if I leave my job?

You lose any money you have not yet used. When you leave, your employer stops contributions immediately. You have until the end of the plan year to submit claims for expenses you already incurred, but any unused balance is forfeited. If you are moving to a new job with an FSA, you start fresh with a new account and new contribution limit.

Can I use my dependent care FSA to pay for my parent's nursing home?

Only if the nursing home provides day care services that allow you to work, and your parent is your tax dependent and lives with you. Full-time residential care does not count. If your parent attends an adult day care center during the day while you work, that is covered.

Are over-the-counter medications covered without a prescription?

As of 2020, yes — you no longer need a doctor's prescription to buy over-the-counter medications with FSA money. Pain relievers, allergy medicine, cold medicine, and antacids all may have access to. You still need a receipt showing what you bought and the date.

Can I change my FSA contribution mid-year?

Only if you have a may have access to life event: birth or adoption of a child, marriage, divorce, loss of other health coverage, or significant change in childcare costs. A job change or change in income alone does not may have access to. If you do have a may have access to event, you have 30 to 60 days to change your contribution, depending on your plan.