From Cayenne to Viagra: The IRS' Dos and Don'ts of Health Care Spending

— By Elizabeth Gettelman

| Fri Dec. 17, 2010 2:17 PM PST

It's that most wonderful time of the year when those of us lucky enough to have jobs, jobs with benefits no less, get to figure out how much to set aside for medical expenses to come. Ever since GWB signed the Medicare bill into law in 2003 we've had the option of setting aside some of our pre-tax dollars for those pesky services not covered by insurance. Flexible Spending Arrangements, or FSAs, are part of cafeteria plans set up to help employees essentially manage their own health care expenses, akin to Health Savings Accounts (which allow funds to be rolled over and are usually not part of traditional health insurance plans). And whatever we set aside we need to use-it-or-lose-it by year's end so it helps to know what you can submit for reimbursement. What's allowed will change some next year because of the health care bill. Namely, drugs you buy over-the-counter, from Advil to NyQuil, will no longer qualify. But lots of other things still will. The IRS' list suggests over and over that whatever you want to be reimbursed for needs to be medically necessary to treat an illness, a medical condition, a sick child, or the like. But not every entry on this 14-page list follows that logic, and there are some bizarre inclusions. Some that stand out:

Cayenne Pepper: Yes, so long as you include "a note from a medical practitioner outlining the specific medical condition that exists and how this pepper is to be used."

Ear Piercing: No, "not even if performed by a physician."

Lip Balm: No

Petroleum Jelly: Yes

Controlled Substances (illegal substances and drugs): "Illegal substances purchased outside of the United States [are] not reimbursable." Wow, if they hadn't have included this bit I totally would have tried to expense my trafficked cocaine from Juarez. No reference to in-country purchases.

Invisalign: Yes, covered. Invisalign is basically very high-end braces. Invisible retainers that refashion teeth into a flashy set of straight whites, covered.

ProActiv: Acne treatments are serious business, and cost serious dough. This one, that comes with infomercials and endorsements from Katy Perry and the like, get specific mention. See also, Retin-A

Rogaine/Propecia: Yes; Hair Growth Medications/Transplants/Procedures: No

Memory Foam Mattress Topper: Yes, with doc's permission, must include "a newspaper advertisement" indicating cost difference.

Masectomy and Related Specialty Bras: Nope, not unless "a doctor's or medical practitioner's note is received stating that this will help in treating the mental health of the patient."

Dancing Lessons: Yes, if to treat a specific medical condition. (We likely have the Dancing with the Stars lobby to thank for this one.)

Feminine Hygiene Products: No, "considered general use items." As opposed to petroleum jelly, and bandages, and laxatives (also both Yeses).

Viagra: Of course! "Viagra prescribed by a doctor to treat a medical condition is allowable."

Christian Science Practicitioners: Yes, though "the treatment must be legal."