FSA: Health Care FSA
A Health Care FSA covers eligible healthcare expenses not reimbursed by any medical, dental or vision care plan you or your dependents may have.
Money in an FSA cannot be used:
- To pay health insurance premiums.
- For the costs of over-the-counter drugs which are not prescribed by a doctor. (Costs of over-the-counter drugs with a doctor's prescription are permitted to be reimbursed).
Health Care FSAs can be limited to paying or reimbursing Health Insurance Premiums, or can be more broad and cover qualified Medical Expenses.
The annual cap for a medical FSA is set by the employer and can vary from year to year.
Eligible dependents for this account include your spouse, children, and any other person who is a qualified IRS dependent.
A major advantage of Health Care FSAs is that you get a tax break on medical expenses without having to meet the threshold which the federal tax code requires in order to obtain a tax deduction. Even then, the deduction is only for expenses in excess of the threshold. The threshold for the itemized deduction for unreimbursed medical expenses is 10% of the taxpayer’s Adjusted Gross Income (AGI). However, in the years 2013–2016, if either the taxpayer or the taxpayer’s spouse has turned 65 before the close of the tax year, the threshold is 7.5% of AGI. In 2017 the 10% threshold will apply to all taxpayers (To learn more, see Medical Expenses)
To learn more about FSAs in general, see: FSA