Plan your FSA election
The 2026 limit is $3,400.
Deductibles, copays, prescriptions, glasses, dental work.
Your employer's plan uses one of three rules for money left at year end: a carryover of up to $680 into 2027, a grace period of up to two and a half months to spend it, or neither. Plans can't offer both a carryover and a grace period. Your summary plan description or open enrollment materials say which one you have.
A health flexible spending account (FSA) lets you pay for medical costs with pre-tax pay, up to $3,400 in 2026. Every dollar you put in skips income tax and the 7.65% FICA tax, so a 22% federal bracket and 5% state tax save you about 35 cents per dollar. The catch is that unspent money is mostly lost at year end. Enter your plan and expected spending to pick an election that saves the most without forfeiting much.
- 2026 health FSA limit
- $3,400 per employee
- 2026 carryover maximum
- $680
- Grace period option
- Up to 2.5 months
- Tax saved per dollar
- Income tax + 7.65% FICA
Health FSA limits for 2026
| 2025 | 2026 | |
|---|---|---|
| Employee contribution limit | $3,300 | $3,400 |
| Maximum carryover into the next year | $660 | $680 |
| Grace period (if the plan uses it) | 2.5 months | 2.5 months |
The limit is per employee, per employer. If you and your spouse both have FSAs through work, you can each contribute up to $3,400. Employer contributions don't count toward the $3,400 unless you could have taken them as cash. To keep the FSA an excepted benefit, employer money is usually limited to $500 or a dollar-for-dollar match.
Your whole annual election is available on the first day of the plan year, even though it comes out of your pay over the year. If you elect $2,400 and have a $2,000 procedure in February, the FSA pays it.
Worked examples
How much to put in your FSA
Start from what you know you'll spend: your deductible if you hit it every year, regular prescriptions, therapy copays, glasses or contacts, and planned dental work. Then adjust for your plan's rule:
- Carryover plan: elect your expected spending plus up to $680. Anything unspent up to that amount rolls into next year.
- Grace period plan: elect your expected spending. You have until about mid-March to use what's left.
- No carryover or grace period: elect a bit less than you expect. Every dollar you forfeit costs a full dollar; every dollar you don't elect only costs you the tax savings, about 35 cents.
If your employer offers an HSA-qualified plan, compare before you elect. A general-purpose health FSA makes you ineligible to contribute to an HSA for the year. A limited-purpose FSA, covering only dental and vision, doesn't. Our HSA vs FSA guide explains the difference.
Limited-purpose FSAs for HSA owners
A limited-purpose FSA covers only dental and vision care, so it doesn't block HSA contributions. If you're on an HSA-qualified plan, it lets you pay for cleanings, fillings, orthodontics, glasses and contacts with pre-tax money while your HSA balance stays invested. The 2026 limit is the same $3,400, and the same carryover or grace period rules apply.
Some plans also offer a post-deductible FSA, which starts covering medical costs only after you've met the HDHP's minimum deductible. Both are worth asking about at open enrollment if you already max out your HSA and still have predictable dental or vision costs. Spending the FSA first on those costs, and leaving the HSA invested, gets you the tax break on both accounts while the HSA keeps growing for later years.
What an FSA can pay for
Health FSAs cover medical care as defined in Section 213(d) of the tax code, the same list in IRS Publication 502. Common uses:
- Deductibles, copays and coinsurance
- Prescriptions and insulin
- Over-the-counter medicines and menstrual products, without a prescription since 2020
- Glasses, contacts and LASIK
- Dental work, including fillings, crowns and orthodontics
- Mental health therapy and psychiatric care
FSAs can't pay insurance premiums, and they can't pay for cosmetic procedures or general health items like gym memberships. Our list of HSA and HRA eligible expenses applies to health FSAs too.
Changing or leaving mid-year
Your election is locked for the plan year unless you have a qualifying change in status, such as marriage, divorce, a birth or adoption, a death in the family, or a change in employment that affects eligibility. The change has to be consistent with the event: a new baby lets you increase your election, not lower it to zero.
If you leave your job, your FSA generally ends on your last day or the end of that month. Claims for care you received before then can still be submitted during the plan's run-out period, often 90 days. Because of the uniform coverage rule, if you'd already spent more than you'd contributed, you don't owe the difference back.
Common FSA mistakes
- Electing for expenses that won't happen. Base the election on care you're confident of, not your deductible if you rarely reach it.
- Missing the claim deadline. Even with a grace period or carryover, receipts have to be submitted by the run-out date.
- Losing receipts. Most FSA cards ask for documentation on some purchases. Keep itemized receipts, not just card slips.
- Enrolling in a general FSA alongside an HSA. It makes you ineligible for HSA contributions for the year. Choose a limited-purpose FSA instead.
- Forgetting to re-enroll. FSA elections don't roll over automatically each year at most employers.
A good rule for most people: list the expenses you're sure of, add them up, and elect that amount. If your plan has a carryover, you can add up to $680 for things that might come up. If it doesn't, leave a margin below your estimate instead. The tax savings on the last few hundred dollars are worth less than the risk of losing them. You can always open a bigger account next year once you know your real spending.
For employers offering an FSA
An FSA is part of a Section 125 cafeteria plan, so it needs a written plan document. The employer saves 7.65% in payroll tax on every dollar employees put in. The main risk is the uniform coverage rule: if an employee spends their full election in February and then leaves, the plan can't recover the difference. Forfeitures from other employees usually cover it.
If you're setting up pre-tax premiums at the same time, the Section 125 calculator estimates what the whole cafeteria plan saves.
