Smart Ways to Use FSA Dollars Before Year End
For many Americans, the COVID-19 pandemic upended their personal health care planning and management. Whether due to a procedure being postponed or access to medical care facilities being restricted — those who have a Flexible Spending Account (FSA) may find that their account balance has been growing unused. As we near the end of 2020, many Americans may be finding themselves with extra FSA money that needs to be spent before those funds are lost.
To help Americans get the most out of their FSAs before their funds expire, here are some guidelines.
Know Your Plan-Year Spending Deadline
FSA dollars work on a use-it-or-lose-it basis. If you don't use your FSA money by the end of your plan year, you risk losing it for good. However, some employer plans offer a little flexibility in one of two ways: 1) by allowing for a two-and-a-half-month grace period (for example, until March 15, 2021 if your plan year ends December 31, 2020); or, 2) letting you roll $500 over the next year (for example, carrying $500 from the balance at the end of this year over to your new plan that starts January 1, 2021). They can't offer both. If you have an FSA, before rushing to spend any extra funds, check with your plan administrator or employee benefits office for the important plan-year deadlines (not all plan years end in December).
There is no need to wait for the new year to strive for a healthy change. Try to schedule covered care you may have postposed like getting an eye exam, a visit to the dentist, blood work or even acupuncture. Chiropractor visits and mental health counseling are also covered by many plans. If you’ve always wanted to stop smoking, you can seize this opportunity to sign up for a smoking cessation plan.
Stock Up on Qualifying Supplies
There are dozens of things that you may purchase regularly that could qualify as an FSA expense. Start by reviewing your receipts from pharmacies and supermarkets to see what you’ve already spent money on that may be covered. Take time to check your medicine cabinet for things that may be running low. Some common items that are FSA-eligible include:
- Medical supplies including first aid kits, medicine droppers, pill boxes/sorters/organizers or pill clocks, pill cutters, and even the batteries for medical devices.
- Test kits and supplies such as blood pressure monitors, blood sugar test strips, and cholesterol or diabetic test kits.
- Walkers, wheelchairs and related repairs and support braces.
- Sunscreen and lip balm (SPF 15 or higher).
- Athletic treatment supplies including knee, ankle and wrist braces, kinesiology tape, arm slings, neck collars, back supports, knee wraps and compression sleeves.
- Products for soon-to-be parents such as pregnancy tests, fertility monitors, prenatal vitamins and breastfeeding supplies.
Even shipping fees for obtaining an FSA qualifying item are eligible for FSA reimbursement. Remember, before buying anything that you want to deduct as a medical expense, make sure it’s FSA eligible. If you’re not sure what exactly qualifies, check with your plan provider. And be sure to utilize all your funds before your plan year is over — otherwise, that’s money lost forever and you can’t get it back.
If you elect to utilize an FSA in 2021, be mindful of how it fits into your larger financial plan. To help, the AICPA’s 360 Degrees of Financial Literacy website, 360FinLit.com
, offers a variety of free articles and resources to help you plan your spending
, as well as tools to help you evaluate your budget.
Consult Your Local CPA
Every day, local CPAs offer clients expert advice on a wide variety of financial concerns, including making a major purchase or obtaining a loan. Whatever your financial questions, your CPA can help you find the answers. Locate a CPA near you with our Find-A-CPA directory.
Copyright 2020 The American Institute of Certified Public Accountants.