What Is an FSA

The plain answer

A healthcare flexible spending account, or FSA, is an employer benefit that lets you set aside pre-tax pay for qualified healthcare expenses. It can reduce your taxable income, but unused money may be forfeited under your employer’s plan rules.

An FSA is usually best when you can estimate predictable expenses such as prescriptions, copays, dental care, or vision care.

How it actually works

For 2026, you can elect up to $3,400 through payroll deductions. Your election generally applies for the plan year and can usually be changed only after a qualifying life event.

The full annual election is normally available at the beginning of the plan year, even though contributions come out of each paycheck. If your plan permits a carryover, up to $680 may move into the following plan year. An employer may offer a carryover or a grace period, but not both. It may also offer neither, so read the plan documents.

Healthcare FSAs are employer-owned benefits. The account generally does not follow you when you leave the job, though continuation coverage may sometimes be available.

What this means for you

Estimate expenses you are reasonably confident you will have during the plan year. Review last year’s eligible spending, then adjust for known changes such as planned dental work, a new prescription, or different insurance coverage.

Choose an election below your likely eligible total if your estimates are uncertain. The tax savings from contributing more may not outweigh the risk of forfeiting unused money.

Common mistakes

• Electing an amount based on optimistic or uncertain spending.
• Assuming every health-related purchase is eligible.
• Missing the plan’s claim submission deadline.
• Assuming the maximum carryover is automatic.
• Confusing a healthcare FSA with a dependent care FSA.
• Contributing to a general-purpose healthcare FSA while making HSA contributions, which can make you ineligible for the HSA.

Related pages

• HSA vs. FSA
• Healthcare FSA
• What is an HSA?