You can use a Flexible Spending Account (FSA) to pay for copayments, deductibles, some drugs, and some other health care costs. FSAs are limited to $2500 per year.
A Flexible Spending Account (also known as a flexible spending arrangement) is a special account you put money into that you use to pay for certain out-of-pocket health care costs.
You don’t have to pay taxes on this money. This means you’ll save an amount equal to the taxes you would have paid on the money you set aside.
FSAs are available only with job-based health plans. Employers may make contributions to your FSA.
You can’t spend FSA funds on insurance premiums.
You can put up to $2500 into an FSA each year. You generally must use that money within the plan year. But your employer may offer one of 2 options:
It can provide a "grace period" of up to 2 ½ extra months to use the money in your FSA.
It can allow you to carry over up to $500 per year to use in the following year.
Your employer can offer either one of these options but not both. It’s not required to offer either one. Learn more about these FSA options.
At the end of the year or grace period, you lose any money left over in your FSA. So it's important to plan carefully and not put more money in your FSA than you think you'll spend within a year on things like copayments, coinsurance, drugs, and other allowed health care costs.
You can spend FSA funds on prescription medications, as well as over-the-counter medicines with a doctor's prescription. Reimbursements for insulin are allowed without a prescription.
FSAs may also be used to cover costs of medical equipment like crutches, supplies like bandages, and diagnostic devices like blood sugar test kits.