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Maximize Your Healthcare Savings with Tax-Free Dollars
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.
Maximum contribution per employee for 2025 (increased from $3,200 in 2024)
For dental and vision expenses only. Can be paired with an HSA
For childcare and dependent care expenses (unchanged from 2024)
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.
The most common type of FSA, allowing you to use pre-tax dollars for a wide variety of healthcare expenses including:
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:
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:
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.
Your Healthcare FSA can be used for a wide range of medical, dental, and vision expenses for you, your spouse, and your dependents.
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.
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.
Your chosen amount is divided equally across your paychecks and deducted before taxes are calculated, reducing your taxable income throughout the year.
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.
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.
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.
FSA funds generally must be used by the end of the plan year. However, your employer may offer one of these options:
Plans can offer either a grace period OR carryover, but not both.
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!
You generally cannot change your FSA contribution mid-year unless you experience a qualifying life event such as:
You generally cannot have both a Healthcare FSA and an HSA at the same time. However, you can have:
Choose the account type that best fits your healthcare needs and financial situation.
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.
Keep all receipts and documentation for FSA purchases. You may need to provide itemized receipts showing:
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:
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:
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:
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:
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:
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:
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:
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.
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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