Items covered by your flexible spending account you may not know about

Chiropractor adjusting a patientUse it or lose it -- that's the mantra of flexible spending accounts (FSAs). It sounds scary, but these accounts, funded by your pre-tax wages, are great ways to save on child care or medical expenses. So whether you're trying to use all the money you set aside this year or are planning for 2011, you can stretch your income to cover lots of things that would otherwise nibble away at your wallet.

But change is coming to medical FSAs on Jan.1, so touch base with your human resources department or the person handling FSAs when deciding how much to set aside for 2011. One big change is medication -- over-the-counter drugs will no longer be reimbursable. You'll need a prescription for things like Tylenol or Claritin in order for the reimbursement request to be honored.

In 2013, medical FSAs will be capped at $2,500, with employers still able to impose even lower limits. Right now, while medical FSAs are not capped, employers tend to limit them to $5,000, according to Josh King, general counsel of Avvo, a free website that rates and profiles doctors and lawyers. Dependent-care FSAs are and will remain limited to $5,000 or lower, depending on the employer.

Despite these limitations, you may be able to get reimbursed on:
  • Treatment plans, whether you need to lose weight, stop smoking, kick the bottle or a drug addiction. The cost of traveling to support groups like Alcoholics Anonymous could also be covered if your doctor says it's necessary.
  • Doctor's visits, from co-pays to prescription medication. And don't forget the cost of transportation to and from the doctor's office, human resources expert Steve Kane told WalletPop in a telephone interview. "People don't think about parking, train fare, mileage, whatever -- that is reimbursable, too."
  • Alternative medicine, as long as it is deemed medically necessary. So appointments with a hypnotist, a chiropractor, an acupuncturist or other practitioners may be allowable.
  • Medical supplies -- we're talking a wide range, including items such as hearing aids, blood sugar test kits, contact lens cleaners, humidifiers and wigs.
  • If you are disabled or are caring for someone who is disabled, retrofitting your home or car to meet those needs is allowable. Acquiring a service animal or buying a wheelchair or walker may also be covered.
  • Surgery, if it is considered medically necessary. That may include LASIK surgery, a mastectomy to treat breast cancer or eye surgery to repair droopy lids that are impeding eyesight.
  • Gym membership, as long as you've got a doctor's note.
  • When it comes to children, a lot can be covered -- everything from pregnancy tests to fertility treatments. And if you have a dependent-care FSA, child care and even day camp are allowable reimbursements.
  • Immunization for a trip overseas, but not the vacation itself, unfortunately. Arguments that the trip is good for your health will fall on deaf ears.
  • Trips to the dentist for regular cleanings, fillings, crowns and other procedures. It can also cover visits to the orthodontist for braces. Just don't try to get reimbursed for a toothbrush or toothpaste.
Just be aware that "funds in one type of plan -- say, dependent-care FSA -- cannot be used for expenses that would be approved under the other type of plan, the medical expense FSA," said King in an e-mail to WalletPop. In other words, if you want to cover the cost of your nanny, open a dependent-care FSA, not a medical one.

Never considered opening an FSA? Reconsider. It can not only save you up to 40 cents in taxes on every dollar, it's a way to invest in yourself, human resources consultant Paula Marks told WalletPop in phone interview. "It's been a difficult 18 months or so in the economy. Now is the time to invest in yourself so you can get the most out of this life-changing moment."
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