What Does OTC Cover? HSA and FSA Eligible Items and Exclusions

Almost every over-the-counter medication and health product sold in a U.S. pharmacy qualifies as an HSA and FSA eligible OTC item, including pain relievers, cold and allergy medicine, antacids, menstrual products, condoms, broad-spectrum sunscreen, bandages, thermometers, and glucose test strips. Since the CARES Act took effect for expenses paid after December 31, 2019, none of these need a prescription. A smaller group of items, like vitamins, supplements, and air purifiers, qualifies only with a Letter of Medical Necessity from your doctor, and a short list of health-adjacent products doesn’t qualify at all.

The Rule That Made Most OTC Items Eligible

Before 2020, buying ibuprofen or antacids with HSA or FSA funds required a doctor’s prescription, which defeated the point for most people. The CARES Act permanently added OTC medications and menstrual care products to the list of qualified medical expenses for HSAs, FSAs, Health Reimbursement Arrangements, and Archer MSAs.¹ It applies to anything paid after December 31, 2019, and it’s not a pandemic-era temporary rule.

The underlying law is IRC Section 213(d), which defines “medical care” as amounts paid for the diagnosis, cure, treatment, or prevention of disease, or for affecting any structure or function of the body.² That’s a broad definition, and it’s why a bottle of aspirin and a blood pressure monitor both make the list, while a gym membership doesn’t.

OTC Medications You Can Buy Without Any Paperwork

Any medication sold off the shelf without a prescription now qualifies.¹ Most of the pharmacy aisle is fair game:

Pain relief, including acetaminophen, ibuprofen, naproxen, aspirin, topical pain patches, and muscle rubs
Cold, cough, and flu products, including decongestants, nasal sprays, cough suppressants, throat lozenges, and multi-symptom liquid remedies
Digestive aids, including antacids, laxatives, anti-diarrheal medications, and acid reducers
Allergy products, including antihistamines, allergy eye drops, and nasal corticosteroid sprays
Skin treatments for medical conditions, including anti-itch creams, antifungal treatments, and acne medications

The important line is drug versus supplement. A bottle of ibuprofen qualifies. A general multivitamin does not unless a doctor has prescribed it for a diagnosed condition.

Menstrual Products and Contraceptives

The CARES Act explicitly added menstrual care products, so tampons, pads, liners, menstrual cups, and sponges all qualify.¹ No prescription or letter of medical necessity is required, and they’re eligible whether you buy them at a pharmacy, grocery store, or online.

Contraceptives qualify too. IRS Publication 502 lists condoms and prescribed birth control pills as includible medical expenses.³ Condoms don’t require a prescription; prescription contraceptives are eligible but sit outside the OTC category.

Sunscreen and First Aid

Sunscreen qualifies when it has an SPF of 15 or higher and provides broad-spectrum protection. The FDA classifies those products as OTC drugs for skin cancer prevention, which brings them under the expanded eligibility rules. A product marketed as a cosmetic tanning aid without an SPF drug facts label may not qualify, so check the packaging before you swipe your card.

First-aid supplies have always been eligible under the medical care definition, since they clearly serve a medical purpose. Adhesive bandages, sterile gauze, antiseptic wipes, medical tape, elastic wraps, and wound closure strips are all fine. If it’s designed to treat or prevent infection or injury, it almost certainly qualifies.

Diagnostic Devices and Vision Care

Medical devices for diagnosis or health monitoring fall squarely within the Section 213(d) definition.² Thermometers, blood pressure monitors, pulse oximeters, and blood glucose test kits and strips are all eligible, and were even before the CARES Act. No prescription needed.

For vision, Publication 502 allows the cost of eyeglasses and contact lenses needed for medical reasons, plus supplies like saline solution and enzyme cleaner.³ Many plan administrators also accept non-prescription reading glasses, though the IRS guidance technically requires a medical reason for eyeglasses. If your administrator pushes back, a short note from your eye doctor usually settles it.

Items That Need a Letter of Medical Necessity

Some products sit in a gray area between medical treatment and general wellness. When an item doesn’t clearly qualify on its own, a Letter of Medical Necessity from your doctor can make it eligible. This is where people most often get tripped up, because the products feel health-related but the IRS doesn’t treat them as automatic.

Publication 502 spells out the main categories that need a physician’s involvement:

Vitamins and supplements aren’t eligible unless a medical practitioner recommends them to treat a specific diagnosed condition. A general “take vitamin D for health” recommendation isn’t enough.³
Special dietary food is eligible only when the food doesn’t satisfy normal nutritional needs, treats an illness, and a physician substantiates the need. You can only claim the amount that exceeds the cost of a normal diet.³
Weight-loss programs qualify only when weight loss is a treatment for a specific disease diagnosed by a physician, such as obesity or heart disease.³
Air purifiers and HEPA filters are eligible under the federal employees’ FSA program with a Letter of Medical Necessity signed by your doctor.⁴

The letter itself is short. Your doctor states the diagnosed condition, identifies the product or treatment, and notes how long you’ll need it. Send it to your plan administrator with the claim or receipt. Without the letter, the administrator will deny the claim and the amount becomes a non-qualified distribution.

What Doesn’t Qualify

The most common mistakes involve items that look health-related but miss the IRS definition. Cosmetic procedures and products are explicitly excluded unless they correct a deformity from a congenital abnormality, accident, or disfiguring disease.² Teeth whitening, anti-aging creams, and elective cosmetic procedures don’t qualify.

General fitness expenses also miss. Gym memberships, treadmills, and fitness trackers benefit general health rather than treating a specific condition, so they’re out. Same for toiletries like toothpaste, shampoo, and deodorant. Publication 502 draws a clear line: expenses “merely beneficial to general health” don’t count.³

Nicotine patches and gum are a surprising exclusion. Stop-smoking programs themselves qualify, but Publication 502 states that OTC drugs designed to help stop smoking, including nicotine gum and patches, cannot be included in medical expenses.³ Prescription smoking cessation medications are eligible.

How to Pay and What to Keep

Most plans issue a benefits debit card that works at the register like any other card. Large retailers use an inventory information approval system that flags eligible items automatically at checkout, so the card approves only qualifying products without extra paperwork. If you pay with personal funds instead, submit a claim to your plan administrator with the itemized receipt and get reimbursed, usually by direct deposit within a few business days once the documentation is verified.⁵

Keep every itemized receipt. Your administrator can audit transactions at any time, and the IRS requires you to keep records showing each distribution was used for a qualified medical expense.⁶ A credit card statement doesn’t cut it because it doesn’t show what you bought. The worst version of this problem is buying eligible and non-eligible items in the same transaction, paying with the benefits card, and being unable to document the split later.

FSA Deadlines Change What You Should Buy and When

FSAs run on a use-it-or-lose-it rule: any balance left after the benefit period ends is forfeited. Your employer’s plan may soften that in one of two ways, but not both. Some plans offer a grace period of up to two and a half months after the plan year ends, during which you can still incur and claim expenses against the prior year’s balance. Others allow a carryover of up to $680 from the 2026 plan year into 2027, provided you re-enroll.⁷ Anything above $680 is lost.

Even with a grace period or carryover, there’s still a claims filing deadline. For federal employees, it’s April 30 following the benefit period.⁷ Private employer plans set their own run-out dates. If you’ve been buying OTC items on personal funds intending to submit later, miss the deadline and you eat the cost. Late November is a good time to check your balance and start stocking up on eligible items you’ll use anyway.

HSAs work differently. No spending deadline, no use-it-or-lose-it, and the balance rolls over indefinitely. That’s one of the biggest practical advantages of an HSA for OTC spending.

What It Costs to Spend on the Wrong Item

Spending HSA funds on something that isn’t a qualified medical expense triggers income tax on the distribution plus a 20% additional tax if you’re under 65. The 20% penalty disappears at 65 or if you become disabled, though regular income tax still applies to non-medical withdrawals.⁶ That 20% is what makes tracking eligibility genuinely worth the effort.

FSA penalties work differently because your employer’s plan administrator is supposed to verify eligibility before releasing funds. If a non-qualified expense slips through, the administrator may require you to return the funds or offset the amount against future claims. Either way, the tax consequences land on you.

Medicare Advantage OTC Allowances Are Not the Same Thing

If you’ve seen ads for Medicare Advantage plans with OTC benefits, those work nothing like HSAs or FSAs. Medicare Advantage OTC allowances are a fixed quarterly subsidy, often loaded onto a pre-paid card, that the plan provides as a supplemental benefit under Medicare Part C.⁸ The allowance, the eligible product list, and the approved retailers are all set by the plan. Unused funds typically expire at the end of each quarter and don’t roll over. The contribution and tax mechanics of an HSA or FSA don’t apply, and you can’t use the allowance for a spouse or dependent. Enrolling in Medicare also generally disqualifies you from making new HSA contributions, though you can still spend an existing HSA balance on qualified expenses.

1
Internal Revenue Service. IRS Outlines Changes to Health Care Spending Available Under CARES Act
2
Office of the Law Revision Counsel. 26 USC 213 – Medical, Dental, Etc., Expenses
3
Internal Revenue Service. Publication 502 (2025), Medical and Dental Expenses
4
FSAFEDS. Eligible Health Care FSA (HC FSA) Expenses
5
FSAFEDS. How Long Will It Take to Receive Reimbursement
6
Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans
7
FSAFEDS. What Is the Use or Lose Rule?
8
Centers for Medicare & Medicaid Services (CMS). Medicare Managed Care Manual – Chapter 4 – Benefits and Beneficiary Protections