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Flexible Spending Accounts (FSA)

Maximize Your Healthcare Savings with Tax-Free Dollars

$3300 2025 Contribution Limit

30% Average Tax Savings

$660 Max Carryover to 2026

What is a Flexible Spending Account?

A Flexible Spending Account (FSA) is an employer-sponsored savings account that allows you to set aside pre-tax dollars from your paycheck to pay for qualified out-of-pocket healthcare expenses. By contributing to an FSA, you can save up to 30% on healthcare costs, depending on your tax bracket.

FSA contributions are deducted from your paycheck before federal income tax, Social Security tax, and Medicare tax are calculated, reducing your taxable income and increasing your take-home savings.

Important: FSAs are only available to employees of companies that offer this benefit. Self-employed individuals are not eligible for FSAs.

Key Benefits

Tax-free contributions and withdrawals
Immediate access to full annual amount
Covers family members' expenses
Wide range of eligible expenses
Optional carryover of unused funds

2025 Contribution Limits & Rules

Healthcare FSA

$3300

Maximum contribution per employee for 2025 (increased from $3,200 in 2024)

Limited Purpose FSA

$3300

For dental and vision expenses only. Can be paired with an HSA

Dependent Care FSA

$5000

For childcare and dependent care expenses (unchanged from 2024)

Carryover Amount

$660

Maximum unused funds that can carry over from 2025 to 2026 (if plan allows)

Household Contributions: If both you and your spouse have FSAs through separate employers, each of you can contribute up to $3300 in 2025, for a total household contribution of $6600.

Types of Flexible Spending Accounts

The most common type of FSA, allowing you to use pre-tax dollars for a wide variety of healthcare expenses including:

Medical co-pays and deductibles
Prescription medications
Dental and vision care
Over-the-counter medications
Medical equipment and supplies
Qualified medical services

Note: You cannot contribute to both a Healthcare FSA and an HSA simultaneously.

Designed specifically for individuals who have a Health Savings Account (HSA). This FSA can only be used for:

Dental care expenses
Vision care expenses
Preventive care (in some plans)

Advantage: Allows you to maximize both your HSA and FSA benefits simultaneously, reserving HSA funds for retirement while using LPFSA for dental and vision needs.

Helps pay for dependent care expenses that enable you to work or look for work. Eligible expenses include:

Daycare for children under 13
Preschool and before/after school care
Summer day camps
Adult day care for disabled dependents
In-home care providers

2025 Limit: $5000 per household ($2,500 if married filing separately)

Note: Unlike Healthcare FSAs, Dependent Care FSAs typically do not offer carryover or grace period options.

FSA-Eligible Expenses

Your Healthcare FSA can be used for a wide range of medical, dental, and vision expenses for you, your spouse, and your dependents.

Doctor Visits & Procedures

Office visit co-pays
Specialist consultations
Physical therapy
Chiropractic care
Acupuncture
Mental health counseling
Surgery and anesthesia
Hospital services

Medications

Prescription medications
Insulin
Medical cannabis (with prescription)
Over-the-counter medications
Birth control pills
Smoking cessation programs

Diagnostics & Tests

Lab work and blood tests
X-rays and imaging
COVID-19 tests
Pregnancy tests
Diagnostic procedures
Health screenings

Dental Services

Routine cleanings and exams
Fillings and restorations
Root canals
Crowns and bridges
Dentures and partials
Tooth extractions
Orthodontics (braces, retainers)
Dental X-rays

Dental Supplies

Toothbrushes and electric toothbrushes
Toothpaste and fluoride treatments
Dental floss and picks
Mouthwash (therapeutic)
Denture adhesive
Teeth whitening (if medically necessary)

Eye Care Services

Eye exams
LASIK and corrective surgery
Vision therapy
Optometrist visits
Ophthalmologist consultations

Vision Products

Prescription eyeglasses
Prescription sunglasses
Contact lenses and solution
Reading glasses
Safety glasses (prescription)
Eye drops (prescription & OTC)
Lens cleaning supplies

Pain Relief & Medications

Pain relievers (aspirin, ibuprofen, acetaminophen)
Cold and flu medicine
Allergy medications
Sleep aids
Antacids and digestive aids
Anti-diarrheal medication
Cough drops and syrups

First Aid & Prevention

Face masks
Hand sanitizer
First aid kits
Bandages and gauze
Sunscreen (SPF 15+)
Thermometers
COVID-19 tests
Blood pressure monitors

Personal Care

Menstrual products (pads, tampons, cups)
Pregnancy tests
Breast pumps and supplies
Condoms and contraceptives
Diabetic supplies
Adult diapers (medical necessity)

Medical Equipment

Crutches and walkers
Wheelchairs
Hearing aids and batteries
Blood glucose monitors
Nebulizers and inhalers
Compression stockings
Braces and supports
Humidifiers and vaporizers

Specialized Items

CPAP machines
Orthopedic inserts and shoes
Wigs (for hair loss from medical conditions)
Medical alert systems
Adaptive equipment
Service animals (medical necessity)

Note: Some expenses may require a Letter of Medical Necessity (LMN) from your healthcare provider. Always check with your FSA administrator to confirm eligibility before making purchases.

For a complete list: Visit the IRS Publication 502 or check with your FSA provider's eligibility tool.

How FSAs Work

1

Enroll During Open Enrollment

Choose your FSA contribution amount during your employer's benefits enrollment period. Remember, you must elect to participate every year - FSAs don't automatically renew.

2

Contribute Through Payroll

Your chosen amount is divided equally across your paychecks and deducted before taxes are calculated, reducing your taxable income throughout the year.

3

Access Full Amount Immediately

Unlike an HSA, your entire annual FSA amount is available on day one of the plan year, even though you're contributing through payroll over time.

4

Pay for Eligible Expenses

Use your FSA debit card or pay out-of-pocket and submit receipts for reimbursement. FSA funds can cover expenses for you, your spouse, and dependents.

5

Use It Before Year End

Remember the "use-it-or-lose-it" rule. Spend your FSA funds by the plan year deadline. Some plans offer a grace period or allow up to $660 to carry over to the next year.

Important Rules & Considerations

Use-It-or-Lose-It Rule

FSA funds generally must be used by the end of the plan year. However, your employer may offer one of these options:

Grace Period: Up to 2.5 additional months to use previous year's funds
Carryover: Up to $660 can carry over to the next plan year

Plans can offer either a grace period OR carryover, but not both.

Annual Election Required

You must actively elect to participate in your FSA every year during open enrollment. FSAs do not automatically renew from year to year.

Mark your calendar for your company's benefits enrollment period!

Qualifying Life Events

You generally cannot change your FSA contribution mid-year unless you experience a qualifying life event such as:

Marriage or divorce
Birth or adoption of a child
Change in employment status
Significant change in dependent care costs

FSA vs. HSA

You generally cannot have both a Healthcare FSA and an HSA at the same time. However, you can have:

An HSA + Limited Purpose FSA (dental/vision only)
An HSA + Dependent Care FSA

Choose the account type that best fits your healthcare needs and financial situation.

Non-Portable Benefit

FSAs are tied to your employer. If you leave your job, you typically lose access to your FSA funds, though COBRA continuation may be available for Healthcare FSAs.

Plan your spending carefully if you're considering a job change.

Documentation Required

Keep all receipts and documentation for FSA purchases. You may need to provide itemized receipts showing:

Date of service or purchase
Description of service/product
Amount charged
Provider name

Frequently Asked Questions

FSAs are employer-sponsored benefits, so when you leave your job, you typically lose access to your remaining FSA funds. However, you may have some options:

You usually have a run-out period (often 90 days) to submit claims for expenses incurred before your termination date
You may be eligible to continue your Healthcare FSA through COBRA, though you'll have to pay the full cost plus a 2% administrative fee
Any unused funds after the run-out period typically revert to your employer

Plan carefully if you know you'll be changing jobs mid-year.

Yes! Your FSA funds can be used to pay for qualified medical expenses for you, your spouse, and your tax dependents, even if they're not covered under your health insurance plan. This includes:

Your spouse
Your children (under age 27 for tax purposes in most cases)
Other tax dependents you claim on your tax return

A Letter of Medical Necessity is a document from your healthcare provider stating that a product or service is medically necessary to treat a specific condition. Some items require an LMN to be eligible for FSA reimbursement, including:

Massage therapy
Gym memberships (when prescribed for a specific medical condition)
Air purifiers
Ergonomic equipment
Certain over-the-counter items

The LMN should include your diagnosis, the recommended treatment, and how long you'll need the item or service.

Generally, you cannot change your FSA election once the plan year begins unless you experience a qualifying life event (QLE). Qualifying events include:

Marriage, divorce, or legal separation
Birth or adoption of a child
Death of a spouse or dependent
Change in employment status (you or your spouse)
Significant change in cost of dependent care
Change in residence

You typically have 30 days from the qualifying event to make changes to your FSA election.

Yes! Since the CARES Act was passed in 2020, over-the-counter (OTC) medications and drugs are FSA-eligible without a prescription. This includes:

Pain relievers (ibuprofen, acetaminophen, aspirin)
Cold and flu medications
Allergy medications
Antacids and digestive aids
Sleep aids
Cough drops and throat lozenges

However, OTC medical supplies like bandages, thermometers, and blood pressure monitors still need to be for medical purposes.

There are typically three ways to access your FSA funds:

FSA Debit Card: Use your FSA debit card directly at the point of sale for eligible purchases. This is the easiest method.
Pay Out-of-Pocket and Submit for Reimbursement: Pay with your own money, then submit an itemized receipt through your FSA administrator's website or mobile app.
Direct Provider Payment: Some FSA administrators allow direct payment to healthcare providers.

When submitting claims, you'll typically need an itemized receipt showing the date, description of service/product, amount, and provider name. Check with your FSA administrator for specific requirements.

While both FSAs and HSAs help you save on healthcare costs, there are key differences:

Feature	FSA	HSA
Ownership	Employer-owned	Employee-owned
Portability	Not portable (lose when leaving job)	Portable (stays with you)
Rollover	Limited ($660 max) or grace period	Unlimited rollover
2025 Limit	$3300	$4,300 (individual) / $8,550 (family)
Investment Options	No	Yes
Requirements	Employer must offer	Must have High Deductible Health Plan

To determine your optimal FSA contribution, consider these expenses:

Regular prescriptions (multiply monthly cost by 12)
Planned medical procedures or surgeries
Expected deductibles and co-pays
Routine dental work (cleanings, fillings, etc.)
Vision care (exams, glasses, contacts)
Ongoing treatments or therapy
Expected OTC medications and supplies
Orthodontics (braces, retainers)

Pro tip: Review your previous year's healthcare spending as a starting point, but be conservative - it's better to contribute slightly less than to lose unused funds at year-end.

Additional Resources

IRS Publication 502

Complete list of eligible medical and dental expenses

Visit IRS.gov →

FSAFEDS

Federal FSA program with comprehensive eligibility information

Visit FSAFEDS.gov →

Healthcare.gov

Learn about FSAs and other healthcare savings options

Visit Healthcare.gov →

Disclaimer: The information provided on this page is for educational purposes only and should not be considered tax, legal, or financial advice. FSA rules and contribution limits are subject to change by the IRS. Always consult with your employer's benefits administrator or a qualified tax professional for advice specific to your situation. Last updated: October 2025.

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