Key takeaways:
You can use your flexible spending account (FSA) or health savings account (HSA) to offset the cost of mental healthcare by saving money on taxes.
Most mental health services — like counseling, prescription-only medications, and treatment for substance use disorder — can be paid for with FSA and HSA tax-free funds. But some services require a letter of medical necessity (LOMN) to qualify.
It’s important to confirm which mental health expenses are FSA or HSA eligible with your plan administrator.
Thanks to the Affordable Care Act, you can get mental health coverage through most individual and small group health insurance plans. This includes plans sold through the health insurance marketplace. But, even with insurance, the out-of-pocket costs of mental health services can still be high.
You can use your flexible spending account (FSA) or health savings account (HSA) to lower the costs of mental healthcare services. But it’s important to confirm which expenses are HSA or FSA eligible and what documentation you may need to receive reimbursement.
Can you use your FSA or HSA to pay for therapy?
Yes, you can use funds in your FSA or HSA for therapy. Generally, therapy is considered an FSA- or HSA-eligible expense if it’s provided for medical or mental health purposes. So a service like marriage or family counseling is typically not eligible.
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FSAs and HSAs are two options for setting aside pre-tax dollars to pay for health expenses. With an FSA, your employer takes money out of your paycheck to put into the account. This money must be used by the end of the year on eligible medical costs to get the tax benefits.
HSAs also provide tax savings when funds are spent on eligible expenses. These accounts require you to be enrolled in a high-deductible health plan. But you can roll over your HSA balance each year and allow the money in your account to grow tax-free.
For an expense to qualify for tax-free spending, your FSA or HSA benefits administrator may ask for a letter of medical necessity (LOMN). A LOMN is a document from your healthcare provider explaining why a test, treatment, or medication is needed.
What mental health expenses are FSA and HSA eligible?
You can use your FSA or HSA to pay for a wide range of mental health services and costs, including:
Mental health counseling
Behavioral health modification
Medications prescribed by a psychiatrist or other licensed healthcare provider
Lodging if you travel to receive mental healthcare
Transportation to mental health appointments
Some over-the-counter (OTC) items like pain relievers
Inpatient treatments
Treatment for substance use disorder
Teletherapy
The IRS has a full list of eligible expenses. But you may find it easier to contact your plan’s benefits administrator — either online or over the phone — to verify what’s covered under your FSA or HSA.
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How much can an FSA or HSA offset the cost of mental healthcare?
Using your FSA or HSA funds to pay for therapy reduces how much you pay in taxes and helps you save money. Let’s say you contribute $3,500 to your HSA this year, and you are in the 22% tax bracket. Because HSA contributions are made on a pre-tax basis, you will save $770 in taxes when you spend the $3,500 on qualified medical expenses.
You can use your FSA or HSA funds to pay for your deductible, copayments, and coinsurance. But your therapist (or another mental health provider) doesn’t need to accept your health insurance for you to use the funds to pay for services. For example, an alternative therapy like acupuncture is often not covered by health insurance plans. But acupuncture is considered an FSA- and HSA-eligible expense.
How do I use my FSA or HSA to pay for therapy and mental healthcare?
If you want to use FSA or HSA funds to pay for therapy, confirm that the treatment is considered an eligible expense first. That way, you’ll avoid penalties for nonqualified expenses.
Usually, your FSA or HSA comes with a debit card. Once you confirm that you have sufficient funds in your account, you can use the debit card at your provider’s office to pay for your portion of the bill. You can also pay for prescription medications and qualified OTC products with your debit card.
If you don’t have an FSA or HSA debit card, you can pay for a service yourself and submit a claim to your benefits administrator for reimbursement. You should keep your receipt from the provider as proof of payment should you get audited.
What documents do I need in order to use my FSA or HSA funds for mental healthcare?
Typically, if the services are considered eligible expenses under your FSA or HSA, you don’t need to provide any documentation to use those funds tax-free. But if you have insurance, it’s a good idea to check with your health plan to see if a prior authorization is needed for a particular service. A prior authorization is an approval of coverage from your insurance company.
A prior authorization is not the same as an LOMN, which you might get from your healthcare provider or therapist. Some mental health services are only eligible if you have a LOMN from your provider. This document needs to explain how the recommended service(s) will benefit your health and be specific to the type and length of treatment. The treatment cannot be for your convenience or more expensive than an appropriate alternative treatment to be eligible.
Let’s say your therapist recommends hypnotherapy to treat your anxiety disorder. The cost of hypnotherapy would not qualify for FSA or HSA reimbursement unless your hypnotherapist writes a LOMN verifying that the treatment is necessary for your health.
Some FSA and HSA benefits administrators may require annual LOMNs for ongoing services. But there is no guarantee that an expense will be reimbursed, even with a LOMN.
Can you use your FSA or HSA funds to pay for mental health treatment? FSA and HSA funds can lower the costs of treatment for many mental health conditions, such as:
Commonly prescribed medications for these conditions, which you can use your FSA or HSA funds to pay for, include:
You can always contact your health insurance plan to verify if a treatment or medication for a specific mental condition is covered. But remember, even if your health plan does not cover a treatment, you may still be able to use your FSA or HSA funds to pay for the costs.
Resources and support for mental health
If you can’t afford mental health treatment, there are many ways to access free or low-cost services. Check out the organizations below for information on these services:
Another great way to lower your out-of-pocket costs for mental healthcare is by using in-network providers. Often, insurance plans cover less of the costs of services from out-of-network providers.
The bottom line
Using your flexible spending account (FSA) or health savings account (HSA) to pay for mental health services is a great way to reduce your out-of-pocket costs.
Before using your FSA or HSA to pay for therapy, contact your benefits administrator to verify if the service qualifies. That way, you can avoid tax penalties. And keep in mind that some mental health services are eligible for reimbursement only if you obtain a letter of medical necessity (LOMN) from your provider.
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References
FSA Store. (n.d.). Therapy, mental health: FSA eligibility.
HSA Store. (n.d.). Hypnosis: HSA eligibility.
Internal Revenue Service. (2023). Publication 502 (2022), medical and dental expenses.
Internal Revenue Service. (2023). Publication 969 (2022), health savings accounts and other tax-favored health plans.
Substance Abuse and Mental Health Services Administration. (2023). Find health care or support for mental health, drugs, or alcohol.
