Using FSA for Therapy

Flexible Spending Accounts (FSAs) can be intimidating when you don’t fully know what they’re for or how they work. Once you understand them, though, you’ll appreciate how they can be a strategic way to make services like mental health care more affordable and accessible. 

The bottom line is this: being able to pay for therapy with FSA funds is well worth the time you’ll invest in demystifying the process. FSA benefits help you pay for most health care services, including therapy, using pre-tax dollars. 

Navigating the rules around how to use FSA for therapy costs might not feel straightforward initially, but this step-by-step guide has all the tips you need to maximize your Flex Spending Account benefits and get the most out of your medical care plan. 

Read on to learn more about how to use your FSA money to pay for the cost of therapy and other essential medical expenses and healthcare needs.

Can You Use FSA for Therapy?

Yes, the Internal Revenue Service’s (IRS) guidelines state you can pay for therapy and other essential medical necessities using pre-tax dollars you’ve put into an FSA account. The FSA reimbursement approach offers significant tax savings, helping to reduce your overall taxable income. 

It’s important to point out that to use FSA for therapy, your medical care treatment must be deemed “medically necessary” by a qualified healthcare professional. For this reason, you should research beforehand to ensure your sessions will be covered. For example, marriage counseling is generally not an eligible expense. 

HSA vs. FSA Coverage for Therapy

It’s not uncommon for people to confuse Health Savings Accounts (HSAs) with FSAs. While both offer tax advantages and help you save for expenses like copays and medical bills, they operate differently and have slightly different rules. 

HSAs: 

You must have a high-deductible health plan 

Funds carry over year-to-year

A higher annual contribution limit makes it a flexible option for long-term savings on medical expenses like therapy

Contributions are pre-tax dollars

Contributions grow with interest

Withdrawals are tax-free as long as funds go toward qualified medical expenses 

FSAs: 

You don’t need a high-deductible plan 

You can’t contribute as much per year as an HSA

Employee-sponsored 

Pre-tax funds are deducted from your paycheck

The entire amount of expected annual contributions is available on day one

Must use what you contribute within a year or risk losing the money

There are occasional exceptions to the use-it-or-lose rule, like if your employer offers a grace period or has a carryover option

Contributions don’t earn interest

Withdrawals are tax-free as long as funds go toward qualified medical expenses 

Despite the differences, you can also use HSA for therapy.

What Mental Health Services Can You Use FSA for?

Flexible Spending Accounts are powerful tools that can help you manage out-of-pocket expenses related to physical and mental healthcare costs. 

Individual therapy

Your FSA funds can help you pay for professional mental health services, like individual therapy sessions. This can mean you can prioritize your medical condition and mental well-being without worrying about financial strain. 

Whether you want to start therapy to cope with anxiety, stress, depression, or any other mental health condition, sessions with licensed therapists will qualify as reimbursable expenses under most FSA reimbursement plans. 

Psychiatric services

Beyond therapy sessions, psychiatric evaluations and treatments are also eligible expenses. You can use FSA for therapy and to cover the cost of a psychiatrist who can diagnose conditions and prescribe medications.  

Prescribed medications

For best results in some conditions, mental health often benefits most from a combined approach that involves both therapy and medication management. Fortunately, prescriptions to support psychiatric treatment typically fall within allowable FSA coverage. 

Transportation for care

Transportation is often overlooked when discussing healthcare needs, but getting to and from appointments is a critical component of access to care. If travel is necessary but challenging, the associated costs can be claimed through your FSA. 

Substance abuse treatment

Substance abuse treatment is a legitimate expense that funds in your FSA can cover. This can be crucial when immediate intervention is needed, but you’re worried that getting help will be cost-prohibitive. Plans like FSAs help ensure you can afford to pay for treatment when it’s most essential.  

Online therapy services

The digital age — and a global pandemic — helped expand access to therapeutic services via online platforms like Talkspace. It’s working, too. Studies show that online therapy is as effective as in-person sessions. With just the touch of a key, you can get top-notch therapy from licensed mental health professionals and pay for it using the pre-tax dollars in your FSA.   

“A Flexible Spending Account can be an ideal way to pay for counseling. The account may have stipulations attached that require you to use the funds or lose them. Talk therapy could be a way to rejuvenate your outlook, stir creativity, and provide an opportunity to take a look at old patterns that no longer serve you. The funds in your FSA could be the perfect tax deduction and mood readjustment all in one.”

– Talkspace therapist, Dr. Karmen Smith LCSW, DD

How to Use Your FSA for Therapy

Using your Flexible Spending Account for therapy is smart. It can lower your final treatment cost since you’re using money from your paycheck before you pay any taxes. 

To use your FSA for therapy, follow these simple steps. 

Double check that the therapy you’re receiving is for what’s known as an “eligible expense” — treatment must be “medically necessary” to treat a specific, diagnosed condition. 

Determine if you’ll need a “letter of medical necessity” (LMN) to be eligible — if so, get this document before seeking treatment to ensure services are allowed. 

Ask your benefits administrator if you need a specific form for an LMN.

Ensure you have enough funds in your FSA account to cover the treatment costs. 

Decide with your therapist if you’ll pay them directly with an FSA debit card or pay out-of-pocket and then submit a claim for reimbursement. 

Keep all receipts and documentation for any FSA claims — this is even more important if you plan to pay upfront and get reimbursed. 

Maximizing Your FSA for Mental Health

With strategic planning, you can maximize your FSA’s benefits — especially regarding mental health services. To navigate the process as effectively as possible and get the most from your FSA contributions, use the following tips:

Estimate your annual cost of therapy and medication needs

Consider how often you’ll have therapy appointments

Ask your therapist if there’s an anticipated rate increase coming up

Figure out how to evenly spread the estimated cost of your mental health services across the next year to determine what your monthly contributions must be

Find out what your annual maximum contribution limit is 

If you think the cost of therapy, medication, and other treatments will exceed your annual FSA contribution limit, different strategies can make mental healthcare affordable. For example, you can: 

Look into what other insurance benefits might cover

Ask your therapist about sliding scale therapy fees, which bring the cost of treatment down based on your income and what you can afford

Use low-cost or free local services offered by your county or community

Couple and maximize treatment outcomes with self-care tactics that are free, like journaling, meditating, working out, and maintaining a healthy diet and sleep schedule 

Get Online Therapy Covered by Insurance

Deciding to get therapy is brave and commendable — doing the work to become the best version of yourself means you can enjoy a healthier, happier life with fulfilling and meaningful relationships. 

Your mental health matters and the cost of care is key in getting help. Flexible Spending Accounts and online therapy platforms like Talkspace are making therapy affordable, with convenient options that work with your schedule at a price that won’t prevent you from getting care. Take advantage of using pre-tax dollars in your FSA for therapy to gain access to the services you need today. Contact Talkspace to learn more about getting online therapy covered by insurance.