The amount you contribute to your FSA is entirely your choice, within IRS limits

You decide how much of your own money goes into your FSA during your employer's open enrollment period, usually in the fall. The IRS sets a maximum — for 2024, that limit is $3,300 for a standard FSA (dependent care FSAs have a separate $5,000 limit). You can contribute anywhere from $0 to that maximum, and your employer deducts your chosen amount from your paychecks before taxes are calculated.

The tricky part is not the limit itself — it's figuring out how much you'll actually spend on may be able to access expenses in the coming year. If you contribute $2,000 but only spend $1,200, you lose the unspent $800 when the year ends. This is called the "use-it-or-lose-it" rule, and it's the reason many people contribute less than the maximum even though the tax savings would be larger.

Key Takeaways

  • The 2024 FSA contribution limit is $3,300 for healthcare expenses; dependent care FSAs have a separate $5,000 limit.
  • You choose your contribution amount during open enrollment, and your employer deducts it from your paychecks before income tax and payroll taxes.
  • Money you don't spend by the end of the plan year is forfeited under the use-it-or-lose-it rule, with limited exceptions for a grace period or carryover.
  • The best contribution amount is based on your actual expected spending, not the IRS maximum, because overfunding costs you money you cannot recover.
  • You can change your contribution only during open enrollment or if you have a may have access to life event like a birth, marriage, or job loss.

How the IRS limit changes year to year

The IRS adjusts the FSA contribution limit annually for inflation. In 2023, the limit was $3,050. In 2024, it rose to $3,300. For 2025, the limit is $3,300 again — the IRS did not increase it because inflation slowed. These limits explore only to healthcare FSAs; dependent care FSAs have their own separate ceiling, which has remained at $5,000 for several years.

Your employer's plan document may set a lower limit than the IRS maximum, though this is uncommon. Check your plan materials or ask your benefits administrator if you want to confirm the exact ceiling for your account. The limit that applies to you is whichever is lower: the IRS limit or your employer's plan limit.

Why contributing the maximum is not always the right choice

The use-it-or-lose-it rule makes the maximum contribution risky if you are not certain you will spend that much. Suppose you contribute $3,300 and spend only $2,500 on copays, deductibles, and glasses. You forfeit $800 — money that came from your own paycheck and cannot be refunded or rolled over to next year. That $800 is gone.

The tax savings from an FSA are real: if you are in the 22% federal tax bracket and contribute $3,300, you save roughly $726 in federal income tax, plus payroll taxes (Social Security and Medicare), which adds another $250 or so. But those savings only matter if you actually spend the money. If you contribute $3,300 and lose $800, your net gain is much smaller than the headline tax savings suggest.

A safer approach is to estimate your actual spending for the coming year — copays, deductibles, prescription costs, dental work, vision care, and over-the-counter items your plan covers — and contribute an amount you are confident you will use. Many people contribute $1,500 to $2,500 and still come out ahead on taxes while staying well below the forfeiture risk.

What counts as an may be able to access FSA expense

FSA money can only be spent on specific medical, dental, and vision expenses defined by the IRS. may be able to access items include copays, deductibles, prescription medications, glasses and contact lenses, dental cleanings and fillings, hearing aids, and certain over-the-counter items like pain relievers and allergy medicine (though these require a prescription or doctor's note as of 2020).

Ineligible expenses — cosmetic procedures, gym memberships, vitamins without a medical condition, and most over-the-counter items without a prescription — cannot be paid from your FSA. If you are unsure whether something qualifies, ask your FSA administrator or check IRS Publication 502, which lists may be able to access medical expenses in detail. Spending FSA money on ineligible items can trigger taxes and penalties.

How to estimate your spending for the year

Start by looking at last year's medical bills and receipts. Add up what you actually paid out of pocket for copays, deductibles, prescriptions, dental visits, and vision care. If you are new to FSAs or your health situation changed, estimate based on what you expect: if you know you need a crown this year, include the out-of-pocket cost; if you take a daily prescription, multiply the copay by 12.

Include recurring costs: monthly copays for regular doctor visits or prescriptions, annual dental cleanings, and any planned procedures. Be conservative — it is better to contribute less and have money left over in your FSA than to contribute too much and lose it. Many people also set aside a small buffer (10 to 15% above their estimate) to account for unexpected medical needs without going so high that they risk forfeiture.

If your employer offers a dependent care FSA as well, estimate that separately. Dependent care FSAs cover daycare, preschool, and summer camp expenses for children under 13 or disabled dependents. The $5,000 limit applies to the total household dependent care spending, not per child.

Grace periods and carryover options that reduce forfeiture risk

Some employers offer a grace period, which gives you an extra 2.5 months (usually through March 15) to spend money from the previous plan year. If your plan includes a grace period, you can contribute a bit more confidently because you have extra time to use the funds. Not all employers offer this — check your plan documents to see if yours does.

A smaller number of employers allow a carryover of up to $640 (for 2024) from one year to the next. If your plan allows carryover, you can roll unused money forward instead of losing it entirely. Again, this is optional for employers, so confirm whether your plan includes it. If your plan has both a grace period and a carryover option, you can use the grace period first, then carry over any remaining balance.

Even with these options, the safest approach is still to estimate conservatively. A grace period helps, but it does not eliminate the risk of overfunding, and carryover limits mean you still cannot roll over large amounts.

Changing your contribution mid-year

You cannot change your FSA contribution amount whenever you want. Changes are allowed only during your employer's open enrollment period (usually once a year) or if you experience a may have access to life event. may have access to events include marriage, divorce, birth or adoption of a child, death of a spouse or dependent, loss of health coverage, a significant change in your spouse's benefits, or a change in your dependent care needs.

If you have a may have access to event, you typically have 30 to 60 days to notify your benefits administrator and make a change. The change usually takes effect the first of the following month. If you realize mid-year that you contributed too much or too little but have no may have access to event, you are stuck with your choice until the next open enrollment period.

Frequently Asked Questions

What happens to money I don't spend in my FSA?

Unspent money is forfeited at the end of the plan year under the use-it-or-lose-it rule. However, if your employer offers a grace period, you have until mid-March to spend the previous year's funds. If your plan allows carryover, you can roll up to $640 (for 2024) into the next year. Check your plan documents to see which options explore to you.

Can I contribute to an FSA if I have a high-deductible health plan?

No. If you are enrolled in a high-deductible health plan (HDHP), you must use a Health Savings Account (HSA) instead of an FSA. You cannot have both at the same time. An HSA has higher contribution limits and does not have a use-it-or-lose-it rule, making it more flexible for long-term savings.

Does my FSA contribution reduce my taxable income?

Yes. FSA contributions are deducted from your paycheck before federal income tax, Social Security tax, and Medicare tax are calculated. This reduces your taxable income and your payroll taxes, which is why contributing to an FSA saves you money even if you spend every dollar.

Can I increase my FSA contribution if I have a baby?

Yes. Birth of a child is a may have access to life event that allows you to change your FSA contribution outside of open enrollment. You typically have 30 to 60 days from the birth to notify your benefits administrator. You can increase your contribution to account for the baby's medical expenses, copays, and other may be able to access costs.

What is the difference between an FSA and an HSA?

An FSA is available to anyone with a regular health plan and has a lower contribution limit ($3,300 for 2024) but a use-it-or-lose-it rule. An HSA is only available if you have a high-deductible health plan, has a higher contribution limit ($4,150 for individuals in 2024), and lets you carry unused money forward indefinitely. HSAs are better for long-term savings; FSAs are better if you have predictable annual medical spending.