What Is an FSA?
A Flexible Spending Account (FSA) lets you contribute pre-tax dollars from your paycheck to pay for qualified medical expenses — copays, deductibles, prescriptions, glasses, dental work, and more. The tax savings effectively give you a 20-35% discount on healthcare costs, depending on your tax bracket.
2026 FSA Limits
- Healthcare FSA: $3,200/year maximum contribution
- Dependent Care FSA: $5,000/year (separate account for childcare)
- Carryover: Up to $640 can roll over to next year (if employer allows)
FSA vs. HSA
- FSA: Available with any health plan. Use-it-or-lose-it (mostly). Employer-owned — you lose it if you leave. $3,200 limit. Funds available in full on day one of the plan year.
- HSA: Requires a high-deductible plan. Rolls over indefinitely. You own it forever. $4,400 limit (individual). Can invest and grow tax-free.
The day-one advantage: Unlike an HSA, your full FSA election is available on January 1 — even if you haven't contributed that much yet. If you elect $3,200 and have a $3,000 procedure in January, the FSA covers it immediately, and you pay back through payroll deductions over the year.
Use-It-or-Lose-It: Plan Carefully
FSA funds that aren't used by the end of the plan year are forfeited (with a possible $640 carryover or 2.5-month grace period, depending on your employer). Estimate your healthcare costs carefully — contributing too much means losing money. Common eligible expenses: doctor copays, prescriptions, glasses/contacts, dental cleanings, orthodontia, physical therapy.
FSA Availability
FSAs are only available through employers. If you're self-employed, a freelancer, or buy your own insurance (marketplace or private), you don't have access to an FSA. Consider an HSA instead if you have a qualifying high-deductible plan.
Related Terms
Last updated: March 30, 2026.
