Telemedicine Tax Traps: When Virtual Care Isn’t FSA Eligible

Telemedicine has exploded in popularity over the past few years, and for good reason. Being able to consult with a doctor from your couch, get a prescription renewed without taking time off work, or have a mental health appointment without commuting across town is genuinely convenient. Most people assume that if they’re paying for medical care, they can use their FSA to cover it. That assumption is causing a lot of confusion and some expensive surprises.

The reality is that not all telemedicine services are FSA-eligible, and the rules governing digital health coverage are a confusing patchwork of regulations that haven’t kept pace with how medicine is actually delivered today. FSA companies are tasked with enforcing rules that were written before anyone imagined you’d consult with a doctor via smartphone, which creates frustrating gray areas and inconsistent application of eligibility standards.

Let’s break down where the problems are, what types of telemedicine do and don’t qualify for FSA reimbursement, and how to avoid getting stuck with unexpected out-of-pocket costs.

The Basic Rule (That Isn’t Actually That Simple)

The fundamental principle is straightforward: medical care is FSA-eligible. If you’re receiving diagnosis, treatment, or prevention of disease from a licensed healthcare provider, that should qualify as a medical expense under IRS regulations.

Telemedicine visits with your regular doctor or through your insurance company’s telehealth program generally meet this standard. If you have a video visit with your primary care physician about a sinus infection, that’s medical care. If you do a virtual follow-up with your cardiologist to discuss your test results, that’s medical care. These consultations should be FSA-eligible just like in-person visits would be.

The problems start when telemedicine involves subscription services, on-demand platforms, or services that blur the line between medical care and wellness advice.

The Subscription Service Problem

Many telemedicine companies operate on a subscription model—you pay a monthly fee for access to their platform, then either get unlimited consultations or pay additional fees per visit. This structure creates immediate eligibility questions.

The monthly subscription fee itself is often not FSA-eligible because you’re not paying for medical care—you’re paying for access to a platform that might provide medical care if and when you need it. It’s similar to how a gym membership isn’t FSA-eligible even though exercise is good for your health. You’re paying for the potential to receive services, not for actual medical treatment.

However, if you pay a per-visit fee on top of the subscription (or instead of it) for an actual consultation with a licensed provider about a medical issue, that specific charge typically is FSA-eligible. You’ll need documentation showing that this was a medical consultation, not just general health advice.

The confusion comes from the fact that some telemedicine platforms include both in their pricing structure, and they don’t always break down what portion of your payment is for what. A receipt that just shows “$49 monthly membership fee” doesn’t give your FSA administrator enough information to determine eligibility.

Mental Health Teletherapy: Mostly Eligible, With Catches

Online therapy and psychiatry platforms have made mental health care more accessible, and the good news is that these services are generally FSA-eligible when they involve actual treatment from licensed mental health professionals.

If you’re doing weekly video sessions with a licensed therapist or psychiatrist through a platform like Talkspace or BetterHelp, those sessions should qualify as medical care. Mental health treatment is explicitly covered under FSA regulations.

The complications arise with services that market themselves as mental health support but don’t involve licensed therapists providing actual treatment. Some apps offer “coaching” or “counseling” from people who aren’t licensed mental health professionals. These services might be helpful, but they’re not medical care in the regulatory sense, which means they’re not FSA-eligible.

The distinction matters: therapy with a licensed clinical social worker, psychologist, or psychiatrist is eligible. Life coaching or wellness coaching, even when it touches on mental health topics, typically isn’t eligible.

The “Medical Advice” vs. “Medical Care” Distinction

This is where things get particularly murky. Some telemedicine services position themselves as providing medical advice or health information rather than diagnosing and treating specific conditions. This distinction significantly impacts FSA eligibility.

Consultations where you’re asking general health questions—”Is this normal?” “Should I be concerned about this symptom?” “What are my options for dealing with this issue?”—exist in a gray area. If the provider is assessing your situation and making medical recommendations, that’s starting to look like medical care. If they’re providing general information that you could find through internet research, it’s harder to classify as eligible medical care.

Direct-to-consumer platforms that offer things like nutrition consultations, wellness assessments, or fitness advice generally aren’t FSA-eligible unless there’s a specific diagnosed medical condition being treated. A consultation with a nutritionist because you want to eat healthier isn’t medical care. A consultation with a registered dietitian as part of treating diagnosed diabetes is medical care.

Prescription Services and Online Pharmacies

Telemedicine platforms that primarily exist to provide prescriptions for specific medications—think erectile dysfunction drugs, hair loss treatments, birth control, or acne medication—present another set of questions.

The medications themselves are almost always FSA-eligible if they’re treating a medical condition. Birth control, acne medication prescribed by a dermatologist, and drugs for erectile dysfunction prescribed by a doctor are all legitimate medical expenses.

But what about the consultation fee that these platforms charge? If you’re paying $50 for a “consultation” that’s really just filling out an online form so the platform’s doctor will write you a prescription for something you’ve already decided you want, is that medical care or is it a convenience fee for prescription access?

The answer depends on whether there’s a genuine medical evaluation happening. If a licensed provider is reviewing your medical history, asking relevant questions, and making an independent determination about whether the treatment is appropriate for you, that’s medical care. If it’s a rubber-stamp process designed to generate a prescription you’ve already chosen, it’s harder to justify as an FSA-eligible medical expense.

Monitoring Apps and Devices

Telemedicine increasingly involves remote monitoring—apps that track your vitals, devices that transmit data to your doctor, platforms that let your healthcare provider check in on your chronic condition management. The FSA eligibility of these services depends entirely on how they’re structured.

If your doctor prescribes a specific monitoring service or device as part of managing your diagnosed medical condition, it’s likely eligible. Remote monitoring of your blood pressure by your cardiologist’s office after you were diagnosed with hypertension is medical care.

If you sign up for a general wellness tracking service because you want to be more mindful of your health, it’s probably not eligible. The presence of health-related data doesn’t automatically make something a medical expense.

The Documentation Nightmare

Even when telemedicine services are legitimately FSA-eligible, getting reimbursed can be challenging because of documentation issues.

FSA administrators need to see that you received medical care from a qualified provider for a medical condition. A receipt that just says “Telemedicine Services – $75” doesn’t provide that information. You need documentation that shows:

• The date of service
• The provider’s name and credentials
• What medical issue was addressed
• That this was an actual medical consultation, not just information or advice

Many telemedicine platforms don’t automatically provide the level of documentation that FSA administrators require. You might need to specifically request an itemized receipt or a superbill that includes all the necessary details.

The COVID-19 Temporary Flexibility (That’s Mostly Gone)

During the COVID-19 pandemic, there was significantly more flexibility around telemedicine and FSA eligibility. Many rules were temporarily relaxed to encourage virtual care when in-person visits were risky or unavailable.

Most of those temporary provisions have expired. We’re back to the standard rules, which means services that were FSA-eligible during the pandemic might not be now. This has created confusion for people who got used to certain telemedicine services being covered and assumed that would continue.

How to Protect Yourself

Given all this uncertainty, here’s how to avoid FSA reimbursement problems with telemedicine:

Before you sign up for a telemedicine service, check with your FSA administrator. Ask specifically about the platform you’re considering. Many administrators have encountered common telemedicine services and can tell you upfront whether they’re typically eligible.

Keep detailed records. Save everything—receipts, visit summaries, prescription documentation, anything that shows you received actual medical care for a specific medical issue.

Separate your charges when possible. If a platform charges you a subscription fee plus per-visit fees, only submit the per-visit charges for FSA reimbursement. Don’t try to claim the subscription fee unless your administrator has specifically confirmed it’s eligible.

Use services connected to your insurance. Telemedicine services offered through your health insurance company are almost always FSA-eligible because they’re clearly part of your medical care. These are typically the safest bet.

Get prescriptions when possible. If your telemedicine visit results in a prescription, that documentation helps establish that this was a legitimate medical consultation, not just general advice.

The Need for Regulatory Clarity

The fundamental problem here is that telemedicine has evolved much faster than the tax regulations governing medical expense deductions. The IRS hasn’t issued comprehensive guidance about how to handle the various business models and service structures that telemedicine companies have created.

Until that happens, FSA eligibility for telemedicine will continue to be inconsistent and confusing. Some administrators take a more generous interpretation of what qualifies as medical care, while others are more strict. The same telemedicine service might be reimbursed by one FSA plan and denied by another.

For now, the burden is on you to understand your specific plan’s policies, keep good documentation, and be prepared for the possibility that some of your telemedicine expenses won’t be FSA-eligible even when they feel like they should be. It’s frustrating, but it’s the reality of trying to fit 21st-century healthcare delivery into a regulatory framework that was designed for a different era of medicine.