The amount you contribute to your FSA is entirely your choice, within limits set by the IRS
You decide how much of your paycheck goes into your Flexible Spending Account during your employer's open enrollment period, usually once a year. The IRS sets a maximum — for 2024, that limit is $3,200 per year for individual coverage. Your employer may set a lower limit, and you can contribute any amount up to that cap, including zero.
The real question is not what you are allowed to put in, but what you will actually spend on may be able to access medical and dependent care expenses in the coming year. Money left in the account at the end of the plan year is forfeited — there is no rollover to the next year (with rare exceptions). So the goal is to estimate your out-of-pocket costs as accurately as you can and contribute that amount, no more.
Key Takeaways
- The IRS limit for 2024 is $3,200 per year for individual FSA coverage, though your employer may allow less.
- You choose your contribution amount during open enrollment, and it comes out of your paycheck before taxes, lowering your taxable income.
- Any money left unspent at the end of the plan year is lost, so contribute only what you expect to spend on may be able to access expenses.
- may be able to access expenses include copays, deductibles, coinsurance, prescription drugs, and dependent care costs — but not insurance premiums or over-the-counter items without a prescription.
- If your life changes mid-year (birth, marriage, job loss), you may be able to change your contribution amount outside of open enrollment.
How to estimate your FSA contribution
Start by looking at your medical expenses from the past year. Add up what you paid out of pocket: copays at doctor visits, prescription costs, deductibles you met, and any coinsurance. If you wear glasses or contacts, include those. If you use dental or vision insurance through your employer, add those copays and deductibles too. If you have a dependent in daycare, add that cost as well — dependent care FSAs are separate from medical FSAs but work the same way.
Be realistic about what you know will happen. If you take a medication every month, that is a predictable cost. If you see a specialist quarterly, count those visits. If you have a planned surgery or dental work, include it. But do not guess at emergency room visits or unexpected procedures — those are hard to predict.
Once you have a total, that is roughly what you should contribute. If you are unsure, contribute less rather than more. It is better to leave some money on the table than to lose it.
What happens if you contribute too much
If you put more into your FSA than you spend, the unused balance is forfeited at the end of the plan year. This is called the "use-it-or-lose-it" rule. Some employers offer a grace period of up to two and a half months into the next year to spend remaining funds, but this is optional — check your plan documents to see if yours does.
A small number of employers also offer a carryover option, allowing you to roll up to $640 (for 2024) into the next year. Again, this is optional and rare. Most plans do not offer it.
Because of this rule, many people contribute conservatively — $500 to $1,000 per year — rather than the full IRS limit. That way, if they do not use all the money, the loss is smaller.
What happens if you contribute too little
If you run out of FSA money before the end of the year, you straightforward pay for remaining expenses out of pocket with after-tax dollars. You cannot add more money to your FSA mid-year unless you have a may have access to life event — such as the birth of a child, marriage, divorce, loss of other health coverage, or a significant change in your dependent care costs.
If a may have access to event happens, you have 30 to 60 days (depending on your employer) to request a change to your contribution. This is why it is worth keeping your employer's HR contact information handy if you are expecting a major life change during the year.
may be able to access expenses to count in your estimate
When you are deciding how much to contribute, only count expenses that your FSA actually covers. Medical FSAs cover copays, deductibles, coinsurance, prescription drugs, insulin, and certain medical equipment like blood glucose monitors and crutches. They also cover dental work, vision care, and hearing aids.
Dependent care FSAs cover daycare, preschool, after-school programs, and summer camps — but only for children under 13 or disabled dependents of any age. They do not cover school tuition for kindergarten and up.
Do not count health insurance premiums, over-the-counter medications (unless you have a prescription), cosmetic procedures, or gym memberships. The IRS publishes a full list of may be able to access expenses on its website, and your employer's plan documents will also specify what is and is not covered.
The tax advantage of contributing
Even though you lose unused money, contributing to an FSA still saves you money in taxes. Your contribution comes out of your paycheck before federal income tax, Social Security tax, and Medicare tax are calculated. If you contribute $2,000 to a medical FSA and you are in the 22% federal tax bracket, you save roughly $440 in taxes that year, plus another $150 or so in payroll taxes. That is real money back.
This tax savings is why even conservative contributors often put something into an FSA, even if they do not spend the full amount. The tax break on what you do spend often outweighs the risk of losing a small balance.
Common mistakes to avoid
The biggest mistake is overestimating your expenses and losing money at year-end. The second biggest is forgetting to submit receipts and reimbursement requests. Your FSA does not automatically pay your doctor or pharmacy — you usually pay out of pocket and then request reimbursement from your FSA administrator. If you do not submit the receipt and request within the important date (often 90 days after the end of the plan year), you lose the right to that reimbursement.
Another common error is assuming that over-the-counter items are covered. They are not, unless you have a prescription from your doctor. Allergy medicine, pain relievers, and cold medicine are not may be able to access unless prescribed. Sunscreen, toothpaste, and vitamins are never may be able to access.
Finally, do not assume your FSA covers everything your health insurance does not. FSA coverage is narrower than insurance coverage. Check your plan documents or call your FSA administrator before you count an expense toward your contribution estimate.
Frequently Asked Questions
Can I change my FSA contribution amount during the year?
Only if you have a may have access to life event: birth or adoption of a child, marriage or divorce, death of a spouse or dependent, loss of other health coverage, significant change in dependent care costs, or change in your employer's FSA plan. You must request the change within 30 to 60 days of the event. Outside of these circumstances, you are locked into your contribution for the entire plan year.
What if my employer does not offer an FSA?
You may be able to open an FSA through your spouse's employer if they offer one. If neither employer offers an FSA, you can open a Health Savings Account (HSA) if you are enrolled in a high-deductible health plan. HSAs work similarly but have higher contribution limits and do not have the use-it-or-lose-it rule.
Do I have to contribute the maximum amount?
No. You can contribute any amount from zero up to your employer's limit (which cannot exceed the IRS limit). Choose an amount based on what you actually expect to spend, not on how much you are allowed to contribute.
What if I leave my job mid-year?
You typically lose access to your FSA when you leave, though you may have a grace period to submit claims for expenses incurred before your departure. Some employers allow you to continue your FSA under COBRA, but you would pay the full premium yourself. Check with your HR department about your specific plan.
Can I use my FSA debit card for anything, or only may be able to access expenses?
Only may be able to access expenses. If you swipe your FSA card at a pharmacy for a non-may be able to access item, the transaction may be declined or you may have to pay out of pocket and request reimbursement later. Some FSA debit cards use real-time may be able to access checking to prevent ineligible purchases.