Funds from a flexible spending account (FSA) cannot be used for teeth whitening expenses. The U.S. Internal Revenue Service (IRS) issued Publication 502, Medical and Dental Expenses, which specifically excludes various medical expenses spent on unnecessary cosmetic procedures, such as teeth whitening.

Key Takeaways

  • Funds from a flexible spending account (FSA) cannot be used for teeth whitening expenses.
  • The U.S. Internal Revenue Service (IRS) specifically excludes various medical expenses spent on unnecessary cosmetic procedures, such as teeth whitening, in IRS Publication 502.
  • A flexible spending account (FSA) is a type of savings account that provides the account holder with specific tax advantages.
  • The IRS specifically prohibits using FSA funds for cosmetic procedures and cosmetic surgery to improve the appearance that is not necessary to treat or prevent disease.

Flexible Spending Accounts (FSAs)

A flexible spending account (FSA) is a type of savings account that provides the account holder with specific tax advantages. FSAs are primarily for salaried employees since only qualified employers can establish and administer FSA plans; self-employed individuals are not eligible to open FSAs.

FSAs allow you to contribute a portion of your regular earnings to pay for qualified expenses related to medical and dental costs. Both contributions to and distributions from FSAs are exempt from federal income tax and employment tax, as long as FSA beneficiaries use the funds for qualified medical expenses and spend as much as they contributed in a particular year. The money in an FSA must be used by the end of the plan year. However, some employers can offer a grace period for the use of the remaining funds in an FSA account. This grace period is typically no longer than two-and-a-half months, through March 15 of the following year.

Qualified Medical Expenses for Flexible Spending Accounts (FSAs)

IRS Publication 502 defines qualified medical expenses as those that are included in an FSA plan description and would qualify for medical and dental expense deductions. To qualify, a medical expense must have a doctor's prescription, even if a drug can be bought over the counter, except for insulin. An FSA beneficiary can also include medical expenses that they used for the prevention and alleviation of dental issues. Preventive dental procedures include teeth cleaning, obtaining sealants, and other services that treat and prevent tooth decay. Individuals can also use FSA funds for expenses necessary to treat dental diseases, such as fillings, braces, dentures, extractions, and X-rays.

The IRS specifically prohibits using FSA funds for cosmetic procedures and cosmetic surgery to improve the appearance that is not necessary to treat or prevent disease. Medical expenses on procedures that do not qualify for FSA distributions include face-lifts, liposuction, hair removal, and teeth whitening. However, the IRS allows medical expenses paid for cosmetic procedures that are necessary to correct for deformity resulting from congenital issues, an accident, trauma or a disease that caused disfiguration. FSA owners face tax consequences for any unqualified medical expenses.