Flexible spending accounts: Use it or lose it time is now

(MoneyWatch) If you set up a flexible spending account in 2012, it's time to check the balance. Most plans give you until March 15 to use the money you set aside in the previous year or lose it forever. (Naturally you have all of 2013 to use the money you've saved for this year's expenses.)

This use-it-or-lose-it provision dissuades many people from contributing to the accounts. But that's a mistake. Money set aside in a flex account comes out of your pay before taxes are computed. That reduces your taxable income and tax expenses, just like contributions to a 401(k). Moreover, there are so many products and services that you can buy with flex-account dollars that the only way you could lose money is if you were unaware of your options or careless with your cash.

But act quickly. If you've got money remaining in your 2012 account, you're likely to need a medical appointment of some type to spend it. Here's what you can -- and can't -- buy with flexible spending account dollars.

Allowable expenses:

Dentistry: Everything from a regular teeth cleaning to getting fillings and crowns are covered. But the health account cannot be used to buy a toothbrush or toothpaste.

Orthodontia/Invisalign: Most dental insurance plans don't include the cost of straightening your teeth -- or pay for just a fraction of the expenses. But you can pay the bills with a health account which can lower your after-tax cost by as much as 30 percent to 40 percent.

Vision: Eye glasses, contacts and Lasik surgery can be paid for with health care account dollars.

Braille: You can use your health account to buy books and magazines in Braille. The cost of a guide dog is also an allowable expense.

Therapy: Visits to a psychiatrist, psychologist or psychoanalyst are covered.

Birth control or fertility treatments: Uninsured costs for everything from birth control pills to vasectomies; pregnancy tests to fertility treatments are allowable expenses. (Health care savings accounts won't pay your cost of adoption, but there's a separate tax break for that.)

Alternative treatments: Your health insurance might not pay for a visit to an acupuncturist, chiropractor or Christian Science Practitioner, but your flexible spending health account can.

Cars and crutches: If you need to buy or rent crutches or re-configure your car to allow for a disability, it's covered. Wheelchairs are covered too.

Over-the-counter medical supplies: If you want to buy over the counter drugs with flexible account dollars, you'll generally need to get your doctor to write you a prescription. The one exception: Insulin is covered with or without a specific prescription.

Weight loss: If it's necessary to address a particular ailment, whether it's obesity, hypertension, diabetes or any other weight-related illness, you can charge the health account for your weight loss program, including membership and meeting fees. The only thing you can't use it for is food.

Rehab: Facilities that check you in to cure your addiction to alcohol or drugs are covered. You can also claim the amount it costs to get to and from Alcoholics Anonymous meetings, if you doctor says attendance is necessary to make you well.

Construction: If you need to add ramps, widen doorways, modify your showers or lights -- or even lower your kitchen counter tops -- to accommodate a dependent who has a disability, it's all considered an allowable medical expense that could be paid with health care account dollars. Government officials said that a family coping with a child's severe allergy to grass could even charge the account for replacing the yard with artificial turf. You can't use these tax-saving accounts to make changes that increase the value of your home, but you can retrofit a house to accommodate a medical need.

Medical conferences: If you want to attend a medical conference that concerns an illness that affects you or a dependent, it's an allowable medical expense that can be charged to a flexible spending account.

Special education: If you or your child need tutoring by someone who is specially trained to deal with your disability, it's also covered.

Trips: If you must go away to get medical treatment, you may be able to charge the cost of the trip to the account.

Miscellaneous: Hearing aids; oxygen; nursing services; physical therapy; lab fees, as well as your co-payments and deductibles...all allowable.

Non-allowable expenses?

Cosmetic surgery: Unless it's a re-constructive surgery following, for example, a mastectomy to treat breast cancer.

Illegal drugs: Even if your state allows medical marijuana, drugs are not covered if they're illegal under federal law.

Memberships/Sports fees/Lessons: You know that joining a gym, getting a personal trainer or taking an exercise class would benefit your health, but they're not considered allowable medical expenses under tax law, so you can't pay for them with a flexible spending account.