Healthcare FSA

The plain answer

A healthcare flexible spending account lets you set aside pretax pay for qualified medical expenses. For 2026, you can contribute up to $3,400 through payroll if your employer offers the benefit.

The account is usually use-it-or-lose-it. Your employer’s plan may allow a limited carryover of up to $680, but it does not have to offer one.

How it actually works

You choose an annual contribution during enrollment. That amount is divided across your paychecks, but the full annual election is generally available for eligible healthcare expenses at the beginning of the plan year.

You can use the account for qualified costs such as deductibles, copays, prescriptions, and many dental or vision expenses. Keep receipts and other documentation because the plan administrator may ask you to prove that a purchase was eligible.

At the end of the plan year, the plan may offer a carryover or a grace period. A carryover lets part of the remaining balance move into the next plan year. A grace period gives you more time to incur eligible expenses. Plans generally cannot offer both, and either option depends on the plan document.

What this means for you

Start with expenses you can predict, such as regular prescriptions, planned dental work, contact lenses, or recurring copays. Compare that estimate with the 2026 contribution limit of $3,400.

Then read your employer’s rules for carryover, grace periods, claim submission deadlines, and what happens if you leave your job. Even when a plan permits carryover, its limit may be lower than the federal maximum of $680.

Common mistakes

• Contributing more than you expect to spend on eligible expenses
• Assuming the plan offers the maximum carryover
• Confusing a claim submission deadline with the last date to incur an expense
• Throwing away receipts after using an FSA card
• Assuming unused funds remain yours after you leave your job

Related pages

• What is an FSA?
• What is an HSA?
• The use-it-or-lose-it rule