A Flexible Spending Account (FSA) is a tax-advantaged savings account offered by employers to help employees save money from their paychecks to pay for eligible out-of-pocket expenses for health, dental, and vision care.
An FSA is only available through an employer. If you are self-employed or your employer does not offer an FSA, you cannot have one.
Since money deducted from your pay is taken before federal, state, and local taxes, your FSA contributions reduce your taxable income. You can use an FSA and save on your health care costs. (The amount depends on your income and tax bracket.) Rather than thinking of it as money taken from your paycheck, you can think of it as money added to your wallet.
The Internal Revenue Service (IRS) annually announces the limit for FSA contributions. For 2025, the annual limit for a Health Care FSA was $3,300, up from $3,200 in 2024. For 2026, the annual FSA contribution limit is $3,400.
A Flexible Spending Account can also be established for Dependent Care expenses. For 2026, the Dependent Care FSA limit is $7,500 per household ($3,750 per individual if married and filing separately).
Funds in both a Health Care FSA and a Dependent Care FSA are subject to a “use it or lose it” rule. That means any funds unspent at the end of the plan year are forfeited to your employer.
When choosing your annual FSA amounts, you only want to budget what you think you will spend on qualified FSA expenses. You also should track what you spend, so you know what dollars are available to spend as the year winds down.
Some employers allow a “carry-over amount” or “grace period” that allows for expenses to be submitted after the plan year ends. Ask your employer about your FSA rules.