An eligible expense is any healthcare or dependent care expense that has been approved by the Internal Revenue Service (IRS) for reimbursement through a specific plan, such as a Flexible Spending Account (FSA), Health Savings Account (HSA), or Health Reimbursement Arrangement (HRA). These expenses are typically paid with pre-tax dollars, offering a significant tax advantage.
Understanding Eligible Healthcare Expenses
Eligible healthcare expenses generally include services and products that diagnose, cure, mitigate, treat, or prevent disease, or that affect any structure or function of the body. The IRS provides detailed guidance on what qualifies as a medical expense.
Common Examples of Eligible Medical Expenses:
- Doctor and Specialist Visits: Copayments, deductibles, and co-insurance for visits to general practitioners, specialists (e.g., cardiologists, dermatologists), and mental health professionals.
- Prescription Medications: Drugs prescribed by a physician.
- Over-the-Counter (OTC) Medicines: Many OTC medications are now eligible without a prescription, including pain relievers, cold and flu remedies, allergy medicines, and antacids.
- Dental Care: Dental cleanings, fillings, crowns, braces, and other orthodontic treatments.
- Vision Care: Eye exams, eyeglasses, contact lenses, and corrective eye surgeries (e.g., LASIK).
- Medical Equipment and Supplies: Crutches, wheelchairs, bandages, diagnostic devices (e.g., blood pressure monitors), and certain personal protective equipment like masks and hand sanitizer.
- Therapies: Physical therapy, chiropractic care, acupuncture, and occupational therapy.
- Lab Tests and X-Rays: Diagnostic services.
For a comprehensive list of eligible medical expenses, individuals can refer to IRS Publication 502, "Medical and Dental Expenses," which is regularly updated. You can find this publication on the official IRS website.
Understanding Eligible Dependent Care Expenses
Eligible dependent care expenses are costs incurred for the care of a qualifying dependent, allowing the taxpayer and their spouse (if filing jointly) to work or look for work.
Common Examples of Eligible Dependent Care Expenses:
- Child Care Centers: Fees for daycare, preschool, and after-school programs for children under the age of 13.
- Nanny or Au Pair Services: Wages paid to caregivers for in-home care.
- Summer Day Camps: Costs for summer programs focused on care rather than specific education (e.g., overnight camps are typically not eligible).
- Elder Care: Expenses for the care of a spouse or a qualifying dependent who is physically or mentally incapable of self-care.
It's important that the care is primarily for the well-being and protection of the dependent, enabling the claimant to work. Details regarding eligible dependent care expenses can be found in IRS Publication 503, "Child and Dependent Care Expenses," also available on the IRS website.
Key Considerations for Eligibility
The eligibility of an expense can sometimes depend on the specific plan (FSA, HSA, HRA) and individual circumstances. It's crucial to:
- Verify with Plan Administrator: Always confirm with your plan administrator (e.g., your employer's HR department or the third-party administrator of your benefits) before incurring an expense if you are unsure about its eligibility.
- Keep Records: Maintain detailed receipts and documentation for all expenses, as you may need them for verification or audits.
- IRS Guidelines: Stay informed about current IRS guidelines, as eligible expenses can be updated periodically.
Understanding what constitutes an eligible expense is vital for maximizing the tax benefits offered by various health and dependent care reimbursement plans.
