Over-the-Counter Drugs Now Covered!

In recent Revenue Rulings, the Treasury Department and the IRS announced over-the-counter drugs can now be paid for with pre-tax dollars through health care flexible spending accounts (FSAs). Treasury and IRS issued guidance clarifying that reimbursements for nonprescription drugs by an employer health plan are excluded from income. Thus, reimbursements by health flexible spending arrangements and other employer health plans for the cost of over-the-counter drugs available without prescription are not subject to tax if properly substantiated by the employee. 

Drugs are increasingly becoming available over-the-counter without prescription. Many health plans no longer cover the cost of these drugs as over-the-counter. While an over-the-counter drug is less expensive than the prescription drug, the cost to many consumers increases because the price paid by the consumer for the over-the-counter drug is greater than the co-payment by the consumer when the drug was covered by insurance. This is especially an issue for individuals who remedy chronic health problems by regularly taking an over-the-counter medicine.

Over-the-counter drugs which are used to treat sickness such as allergy & cold medications are now eligible for reimbursement from your FSA. Also eligible are pain relievers such as aspirin and antacids.

Vitamins and dietary supplements that are used to maintain general good health are not included.

Although a doctor’s prescription is no longer necessary for these items, proper claim substantiation is still required.

See our Over the Counter Drugs FAQs.