How Can I Use FSA Money: Eligible Costs, Cards, and Deadlines

You use FSA money by spending it on IRS-approved medical, dental, vision, or dependent care expenses, either by swiping the FSA debit card your plan issues or by paying out of pocket and submitting an itemized receipt for reimbursement. The rules on how to use FSA money come down to three questions: is the expense eligible, can you document it, and can you spend the balance before your plan’s deadline. Miss the third one and the leftover money is gone.

What a Health Care FSA Pays For

IRS Publication 502 sets the standard: the expense has to diagnose, treat, prevent, or alleviate a physical or mental condition.¹ That’s a broad definition, and it covers most of the things people run into during a normal year:

Copays, deductibles, coinsurance, specialist visits, lab work, surgery, and hospital stays.
Prescription drugs, including specialty medications and insulin.
Over-the-counter medications like cold medicine, pain relievers, and allergy medications, which became eligible without a prescription under the CARES Act.²
Menstrual care products — tampons, pads, liners, and cups — under the same CARES Act expansion.²
Eye exams, prescription glasses, contact lenses, and lens solution.
Cleanings, fillings, crowns, root canals, orthodontics, and dentures.
Therapy sessions, psychiatric care, and substance abuse treatment.
Crutches, blood pressure monitors, bandages, and first aid supplies.

There’s a middle category too. Air purifiers, acne treatments, ergonomic equipment, certain alternative therapies — these can be eligible when tied to a diagnosed condition, but the plan administrator will usually ask for a Letter of Medical Necessity from your provider identifying the condition and explaining why the item is needed.³

One useful quirk of the Health Care FSA: your full annual election is available on the first day of the plan year, even before you’ve contributed most of it through payroll.⁴ Elect $3,000, need a $2,000 procedure in January, and the money is there. You don’t have to wait for the account to fill up.

What It Won’t Pay For

This is where the mistakes cluster. Anything primarily about appearance, general wellness, or comfort is out. Publication 502 excludes:¹

Cosmetic procedures like facelifts, hair transplants, teeth whitening, and liposuction, unless they correct a deformity from a congenital condition, injury, or disease.
Gym memberships and fitness classes, even with a doctor’s recommendation.
Vitamins and supplements, unless prescribed to treat a specific diagnosed condition.
Weight-loss programs, except when prescribed for a specific disease such as obesity, hypertension, or heart disease.
Marijuana, regardless of state legalization, because it remains a controlled substance under federal law.
Childcare for a healthy baby, even when it lets you attend a medical appointment. That may be eligible under a Dependent Care FSA instead.

If you swipe the card on something ineligible and can’t return it, you have to repay the account. Ignore the request and the amount can be treated as taxable income.

Paying With the Card or Getting Reimbursed

Most plans issue a dedicated FSA debit card. Swipe it at the pharmacy, doctor’s office, or eligible retailer, and the charge comes straight out of your balance. Retailers with inventory systems that flag FSA-eligible items will often auto-approve at checkout. For anything that can’t be auto-verified, the administrator may follow up asking for a receipt. Ignore that request and the charge gets flagged as ineligible.

When you don’t have the card on you, or the merchant doesn’t take it, pay out of pocket and file a reimbursement claim. Most administrators run an online portal or mobile app: you upload the receipt, the claim gets reviewed, and approved reimbursements usually reach your bank account by direct deposit within a few business days.

Documentation the Plan Will Actually Ask For

Credit card slips and canceled checks don’t cut it. Itemized receipts have to show five things:⁵

Patient’s name.
Provider’s name — the doctor, pharmacy, or merchant.
Date of service or purchase.
Description of the service or product.
Amount you paid, or the portion insurance didn’t cover.

For anything routed through insurance, the Explanation of Benefits statement from the insurer usually contains all five and is often the fastest document to submit. Keep them as they arrive. For gray-area purchases, add the Letter of Medical Necessity to the file so you’re not scrambling to get one signed after the claim is denied.³

Using a Dependent Care FSA

A Dependent Care FSA is a different account with different rules, so don’t assume anything from the health side carries over. It reimburses the cost of care for qualifying dependents while you work or actively look for work.⁶ Eligible services include licensed daycare, preschool, before-and-after school programs, and summer day camps. Overnight camps don’t qualify.

A qualifying dependent is:⁶

A child under age 13 who is your dependent. Once the child turns 13, only expenses incurred before the birthday are eligible.
A spouse who can’t care for themselves due to a physical or mental condition and who lived with you for more than half the year.
Another dependent who can’t dress, feed, or clean themselves due to a disability and who lived with you for more than half the year.

The care has to be work-related. If one spouse doesn’t work and isn’t looking for work, dependent care expenses generally don’t qualify. The exception is a non-working spouse who is physically or mentally unable to care for themselves, who is treated as having earned income for the months the condition applies.

One structural difference from the Health Care FSA: with the dependent care account, you can only be reimbursed up to what you’ve actually contributed so far. There’s no full-balance-on-day-one benefit.

Spending It Before You Lose It

The IRS enforces a “use-or-lose” rule: any Health Care FSA balance left at the end of your plan year is forfeited.⁷ Your employer can soften this in one of two ways, but not both:

A grace period of up to two and a half extra months after the plan year ends, during which you can incur new eligible expenses using leftover funds. If your plan year ends December 31, you’d have until March 15.⁷
A carryover of up to $680 of unused Health Care FSA funds into the next plan year automatically. Anything above $680 is forfeited.⁸

IRS rules prohibit a plan from offering both.⁴ Some employers offer neither, leaving the strict plan-year deadline. Check your plan documents, because this single detail determines whether a leftover balance is salvageable.

Separate from all of that is the run-out period, usually around 90 days after the plan year ends. That’s a paperwork window: you can still submit claims for expenses that were incurred during the plan year but haven’t been filed yet. You’re not spending new money, you’re catching up on receipts. Miss the run-out and you lose reimbursement on valid expenses you already paid for.

Changing Your Election or Leaving the Job

Once you elect an FSA contribution amount at open enrollment, you generally can’t change it until the next enrollment period. The exception is a qualifying life event: marriage, divorce, birth or adoption of a child, death of a dependent, or a significant change in other coverage. You typically have 30 days after the event to adjust. Which events allow a change, and whether the change can be an increase, decrease, or cancellation, depends on your plan.

When you leave your job, Health Care FSA access stops on your last day of coverage, and any remaining balance is generally forfeited. The flip side of the full-balance rule cuts in your favor here: if you spent the whole annual election in January and left in February, you don’t owe the unfunded portion back.

Some employers offer COBRA continuation for the Health Care FSA, which lets you keep using the account for the rest of the plan year. You pay the full contribution amount plus up to 2% in administrative costs, with no employer subsidy.⁹ It only tends to make sense when you have a large unused balance and known upcoming expenses.

Dependent Care FSAs work differently on separation. Unused funds aren’t forfeited immediately. You can still submit claims for eligible expenses incurred through the end of the plan year, as long as the care allowed you or your spouse to work during the period you were employed.

1
Internal Revenue Service. Publication 502 (2025), Medical and Dental Expenses
2
Internal Revenue Service. IRS Outlines Changes to Health Care Spending Available Under CARES Act
3
FSAFEDS. Eligible Health Care FSA (HC FSA) Expenses
4
Internal Revenue Service. Notice 2013-71 – Modification of Use-or-Lose Rule for Health Flexible Spending Arrangements
5
FSAFEDS. File a Claim
6
Internal Revenue Service. Publication 503 (2025), Child and Dependent Care Expenses
7
FSAFEDS. What Is the Use or Lose Rule – FAQs
8
FSAFEDS. New 2026 Maximum Limit Updates
9
U.S. Department of Labor. Continuation of Health Coverage (COBRA)