To use your FSA card, activate it when it arrives, then pay with it wherever you’d buy qualifying medical goods or services: pharmacies, doctor’s offices, vision and dental providers, and online retailers that recognize FSA payments. The card draws from pre-tax money you set aside through your employer, and for 2026 you can contribute up to $3,400 to a health care FSA.1Internal Revenue Service. Rev. Proc. 2025-32 The mechanics are simple. The rules around eligible items, receipts, and deadlines are where people lose money.
One thing worth knowing before you spend a dollar: your full annual election is available on day one of the plan year. If you elected $3,400 and need a $2,000 procedure in January, the card covers it even though you’ve only contributed a fraction so far.
Activate the Card and Check Your Balance
Your plan administrator mails the card to the address your employer has on file. Before you can use it, call the number on the activation sticker or log into the administrator’s portal. You’ll set a PIN during activation. Save it somewhere you can find at checkout.
Check your balance before you swipe. If the charge exceeds what’s available, the transaction declines outright. The administrator’s app or website shows your available balance, pending transactions, and claims history in real time. The balance reflects your full annual election minus expenses already processed.
If the card is lost or stolen, contact the administrator immediately to deactivate it and request a replacement. In the meantime, pay out of pocket and file a reimbursement claim.
What Counts as an Eligible Purchase
The tax code defines eligible expenses as costs for diagnosing, treating, or preventing disease, or affecting any structure or function of the body.2Office of the Law Revision Counsel. 26 USC 213 – Medical, Dental, Etc., Expenses That’s broader than most people assume. Since 2020, over-the-counter medications like pain relievers, cold medicine, and allergy pills no longer need a prescription to qualify.3FSAFEDS. All Over-the-Counter (OTC) Medicines or Drugs Menstrual care products, including pads, tampons, and cups, are also eligible without one.4Internal Revenue Service. Health Savings Accounts and Other Tax-Favored Health Plans
Beyond copays, prescriptions, and lab fees, categories people commonly overlook include:
- First aid supplies like bandages, antibiotic ointments, and thermometers
- Sunscreen with SPF 15 or higher
- Eyeglasses, contact lens solution, and dental cleanings
- Home health monitors including blood pressure cuffs and blood sugar test kits
- Smoking cessation products and programs
- Condoms, fertility tests, and birth control
- Antacids, heartburn relief, and laxatives
- Orthotic inserts and callus removers
Telehealth copays qualify too. Purely cosmetic purchases don’t. Teeth whitening and elective procedures that don’t treat a medical condition fall outside the definition.
Paying at a Pharmacy or Doctor’s Office
At a pharmacy, medical office, or clinic, the card works like a debit card. Insert the chip or swipe. If the terminal asks whether to run it as debit or credit, debit uses your PIN and credit uses a signature. Both work.
Pharmacies and big-box stores that sell a mix of medical and non-medical items typically use an Inventory Information Approval System, which checks each barcode against a database of FSA-eligible products.5Regulations.gov. IRS Health Savings Accounts and Other Tax-Favored Health Plans – Section: Inventory Information Approval System (IIAS) The register automatically splits your cart, charging the FSA card only for eligible items and asking for a second card to cover the rest. It happens at checkout without any special steps on your part.
At stores without that system, the card may only work at a dedicated pharmacy counter rather than a general checkout lane. Ask the pharmacist if you’re unsure.
Paying Online
Online, enter the card number, expiration date, and CVV like any other payment method. Major pharmacy chains and FSA-focused retailers accept the card directly and label eligible items on product pages so you know before you check out.
Watch the timing near year-end. Expenses must be incurred before your plan year closes, and online charges don’t post until the order ships. A December 30 order that ships in January can slide into the next plan year. Give yourself several days of cushion if you’re spending down a balance.
Why the Card Gets Declined
A decline doesn’t always mean an empty account. The common causes:
- The merchant’s four-digit category code isn’t on your plan’s approved list. This blocks the transaction automatically, even when the item itself qualifies. Small medical practices and specialty providers sometimes carry the wrong code.
- The retailer hasn’t implemented the inventory verification system, so the card won’t run at a general checkout lane.
- The charge exceeds your available balance. Ask the cashier to run the FSA card for what’s available and pay the rest with another card.
- The card is inactive or expired. New plan-year cards sometimes need re-activation.
When a legitimate expense declines, pay out of pocket, keep the itemized receipt, and file a manual reimbursement claim through the administrator.
Keeping Receipts for Substantiation
The IRS requires every FSA expense to be substantiated, meaning the administrator must confirm the money went to a qualifying medical cost.6Internal Revenue Service. Amounts Received Under Accident and Health Plans Stores with an inventory verification system handle this automatically. Everywhere else, expect occasional requests to upload a receipt, especially for services at a doctor’s office.
Your documentation needs to show four things: the date of service, the provider or merchant name, a description of the service or product, and the amount you paid. An Explanation of Benefits from your insurer also satisfies the requirement. Most administrators let you upload a photo through their app or member portal.
Don’t ignore substantiation requests. The IRS has said self-certification doesn’t count, and a plan that skips verification risks disqualification.6Internal Revenue Service. Amounts Received Under Accident and Health Plans If you don’t respond, the administrator can suspend the card, and the unsubstantiated amount gets added to your taxable income.
Fixing an Ineligible Purchase
If you accidentally use the card for something ineligible, the administrator will ask you to repay the account. You can send a check or money order, or offset the amount by submitting receipts for other eligible expenses you paid out of pocket. Your card may be deactivated until the balance is resolved.
Ignoring it costs you twice. The amount gets treated as taxable income and reported on your W-2, and you lose the money along with the tax benefit.
Deadlines and the Use-It-or-Lose-It Rule
Money left in your FSA at the end of the plan year is forfeited unless your employer offers one of two options (not both):4Internal Revenue Service. Health Savings Accounts and Other Tax-Favored Health Plans
- A grace period of up to two and a half months after the plan year ends to incur new expenses with leftover funds. For a plan year ending December 31, that runs through March 15.
- A carryover of up to $680 in unused funds into the next plan year for 2026. Anything above $680 is still forfeited.1Internal Revenue Service. Rev. Proc. 2025-32
Some plans offer neither and end with a hard cutoff on the last day of the year. Ask your employer which applies.
A separate run-out period may give you extra time to submit paperwork for expenses already incurred, but you cannot use it to incur new ones. This is where people get tripped up: the run-out period is about filing claims, not about spending.
Estimate expenses conservatively rather than maxing out the election. Forfeited funds are gone, and your employer cannot refund them to you.
Leaving a Job Mid-Year
The FSA doesn’t follow you to a new employer. When you leave, you lose access to the card and can only claim reimbursement for eligible expenses incurred before your termination date. Any remaining balance is forfeited unless you elect COBRA, which is available if your former employer has 20 or more employees.7U.S. Department of Labor. Continuation of Health Coverage (COBRA) COBRA lets you keep using the FSA through the end of the plan year, but you pay the full contribution amount plus a 2% administrative fee with after-tax dollars, which eliminates most of the tax advantage. For most people, the better move is to schedule any planned medical spending before your last day.