Use It or Lose It

Still have some money left in your flexible spending account? Here are five creative ways to use it before year-end.

WITH THE END OF the year rapidly approaching, 33-year-old Stephanie Borise needs to rack up some medical bills -- fast.

Borise still has $1,000 left to spend in her flexible spending account (FSA), a benefit provided by her employer that allows her to use pretax dollars to pay for health-care expenses not covered by insurance. These popular accounts have helped millions of Americans save on health-care costs over the years, but they come with one frustrating provision: The money set aside each year must be used before year-end. In other words, you must use it -- or you'll lose it.

The good news: It's fairly easy to generate extra bills when it comes to health care. Already, Borise, a fair-skinned New Yorker, has scheduled appointments for a full-body skin cancer check and an eye exam. She has also decided to see her therapist more regularly. If that doesn't eat up the $1,000 before the ball drops in Times Square, she'll spend the remaining money at the drug store, loading up on supplies for the winter cold season.

Jon Kessler, chairman of WageWorks, an FSA administrator, says that FSAs, when used properly, can save the typical family up to 30% to 40% in taxes on their contribution. The key is to estimate conservatively how much you need -- and to know what's covered, which varies by company. While the IRS has set general guidelines, it's up to your employer to interpret them. Generally speaking, most "medically necessary" items are covered, from deductibles to antacid tablets.

Do you still have some FSA money to burn before year-end? Don't worry. We've got five suggestions on how to spend it.

1. Drugstore Cowboy
Thanks to a 2003 IRS ruling, FSAs now cover all over-the-counter medications. So if you have some money to spend, now is a good time to load up on aspirin, allergy remedies, Nicorette gum and certain cold supplies (including cough drops). Note, however, that vitamins aren't covered. The IRS views these supplements as food, not medicine, says Kessler.

2. The Eyes Have It
Eye care is a common target for last-minute FSA dollars. Think big. If you already have plenty of pairs of eyeglasses, you could buy a pair of prescription sunglasses. And if you wear disposable contact lenses, there's no reason you can't log onto 1-800 CONTACTS and buy enough boxes of Acuvues to last you well into next year.

You needn't stop there. Last year, Joel Yarbrough, 33, of Oakland, Calif., spent $250 at on contact-lens solution. Sound extreme? Perhaps, but his employer (and the IRS) had no problem with it.

3. In the Bedroom
Most companies (some faith-based organizations excluded) will reimburse you for anything related to birth control and fertility, including pricey IV treatments, ovulation kits, birth control pills and pregnancy tests. And once you decide that your family planning days are over, you can get reimbursed for surgical procedures that help prevent future pregnancies.

You can also use pre-tax dollars for items that don't require a prescription or an office visit. That means all those Casanovas out there can spend their remaining FSA dollars on prophylactics and what not.

4. Cosmetic Surgery
This category is a tricky one. Typically, the IRS doesn't allow people to use pre-tax dollars to pay for cosmetic surgery. So don't even think about trying to claim a face-lift or liposuction. (Most weight-loss-related items and surgeries aren't eligible.)

That said, the lines between what is considered cosmetic and what is considered restorative are a bit fuzzy. A typical nose job, for example, wouldn't be covered, but you could get reimbursed if you have a deviated septum that impairs your breathing. And while you might simply think your varicose veins are ugly, the government has decided that having them removed is a medical procedure worthy of reimbursement.

5. A Flat-Screen TV?
Creativity is sometimes rewarded handsomely, says WageWorks' Kessler. If you can prove to your plan administrator that there's a legitimate medical reason for something you purchased, chances are it'll be covered. It's not uncommon for FSAs to allow, for example, the installation of safety bars in an elderly or disabled person's home or an expensive mattress for someone who suffers from back pain.

People have claimed even more whimsical expenses. Kessler says he once heard of someone with severely impaired vision being approved for a large-screen TV. Another person even managed to get all of her pet expenses covered, since her therapist recommended adopting a cat to help ease her depression.