A Flexible Spending Account lets you set aside pre-tax money from your paycheck to pay for medical expenses your insurance doesn't cover

A Flexible Spending Account (FSA) is an employer-sponsored plan where you contribute money before taxes are taken out, then use that money to pay for may be able to access medical, dental, and vision costs. The money comes directly from your paycheck, which lowers your taxable income for the year. You decide how much to contribute each year during your employer's open enrollment period, and that amount is set until the next enrollment window — usually once a year.

The main trade-off is the "use-it-or-lose-it" rule: money you don't spend by the end of the plan year (or a short grace period, if your employer offers one) goes back to your employer. You cannot carry it forward or get it refunded. This is why FSAs work best if you can predict your medical costs fairly accurately.

Key Takeaways

  • FSA contributions come from your paycheck before taxes, which reduces the amount of income tax you owe that year.
  • You can use FSA money for copays, deductibles, prescriptions, dental work, vision care, and other costs your insurance doesn't fully cover.
  • Money left unspent at the end of the plan year is forfeited unless your employer offers a grace period or carryover option.
  • You must enroll during your employer's open enrollment period, and your contribution amount is locked in for the entire plan year.
  • FSAs are separate from Health Savings Accounts (HSAs) and have different rules about who can open one and how much you can contribute.

What expenses you can pay for with FSA money

FSA funds cover a broad range of medical, dental, and vision expenses that your insurance either doesn't cover or only partially covers. Common may be able to access expenses include copays and coinsurance, deductibles, prescription medications, dental cleanings and fillings, orthodontia, eyeglasses and contact lenses, and hearing aids. You can also use FSA money for over-the-counter items like pain relievers, allergy medication, and first-aid supplies — but only if you have a prescription or a doctor's written order for them.

Some expenses are not may be able to access: cosmetic procedures, gym memberships, vitamins (unless prescribed), and most wellness products fall outside FSA coverage. If you are unsure whether a specific cost qualifies, your plan administrator or employer's benefits team can tell you before you spend the money.

How much you can contribute and the annual limits

For 2024, the maximum FSA contribution is $3,200 per year. This limit can change annually, so check with your employer or plan documents each year during open enrollment. You decide your contribution amount based on what you expect to spend on may be able to access medical costs in the coming year — the lower your estimate, the less you risk losing at year-end.

Unlike HSAs, FSA contribution limits are per person, not per family. If both you and your spouse work and both have access to an FSA through your employers, you can each contribute up to the annual limit through your respective plans. Your employer may also set a lower limit than the federal maximum, so review your plan documents.

The use-it-or-lose-it rule and grace periods

Money remaining in your FSA at the end of the plan year is forfeited — you cannot roll it over to the next year or withdraw it. This is the biggest drawback to FSAs and why they require careful planning. However, some employers offer a grace period of up to 2.5 months after the plan year ends, during which you can still spend down your remaining balance on may be able to access expenses. Not all employers offer this, so ask your benefits team whether yours does.

A smaller number of employers allow you to carry over up to $610 (for 2024) into the next plan year, though this is less common. If your employer offers either option, it will be spelled out in your plan documents. If neither is available and you have unspent money, that amount is lost.

How to access and spend your FSA funds

Most FSAs come with a debit card that you can use at pharmacies, doctors' offices, and other healthcare providers. When you swipe the card, the amount is deducted from your FSA balance. Some providers may ask you to submit a receipt or proof that the expense is may be able to access, especially for over-the-counter items.

If your employer does not provide a debit card, you can pay out of pocket and then submit a claim to your plan administrator for reimbursement. You will need to provide a receipt showing the date, amount, and type of service or product. Reimbursement typically takes one to two weeks after the plan administrator receives and approves your claim.

FSA vs. HSA: which is right for your situation

FSAs and HSAs are both tax-advantaged accounts, but they have different rules and work best for different people. An FSA is available through your employer and does not require you to be enrolled in a high-deductible health plan (HDHP). An HSA requires an HDHP and is portable — you keep it even if you change jobs. FSAs have a use-it-or-lose-it rule; HSAs let you carry money forward indefinitely and even invest it for long-term growth.

If your employer offers both, an HSA is usually the better long-term choice because you do not lose unspent money and you can build savings over time. However, if you have predictable annual medical costs and your employer does not offer an HSA, an FSA is a straightforward way to reduce your taxable income and set aside money for healthcare expenses you know are coming.

Enrollment, changes, and what happens when you leave your job

You enroll in an FSA during your employer's open enrollment period, which is usually once a year in the fall or winter. You cannot change your contribution amount mid-year unless you have a may have access to life event — marriage, birth of a child, loss of other health coverage, or a significant change in your healthcare needs. Your employer's benefits team can tell you whether your situation qualifies.

If you leave your job, your FSA ends. Any unspent balance is forfeited, even if you are in the middle of the plan year. You cannot transfer FSA money to a new employer's plan or to an HSA. This is another reason to be conservative with your contribution amount — if there is any chance you might change jobs during the year, contribute only what you are confident you will spend.

Frequently Asked Questions

Can I use my FSA for my spouse or children?

Yes. You can use your FSA to pay for may be able to access medical expenses for yourself, your spouse, and any dependent children, even if they are not covered under your health insurance plan. The money in your account is yours to use for any family member's may have access to expenses.

What happens to my FSA if I do not spend all the money by the end of the year?

Any unspent balance is forfeited and goes back to your employer. Some employers offer a grace period (usually 2.5 months into the next year) to spend remaining funds, or allow a small carryover into the next plan year. Check your plan documents or ask your benefits team whether either option applies to you.

Can I use my FSA to buy health insurance premiums or pay for long-term care?

No. FSA money cannot be used for health insurance premiums, long-term care insurance, or long-term care services. It also cannot be used for life insurance, disability insurance, or most cosmetic procedures. Your plan documents list all may be able to access and ineligible expenses.

Do I have to enroll in an FSA every year?

No. Once you enroll, your FSA continues automatically each year at the same contribution level unless you change it during open enrollment or have a may have access to life event. However, if you do not actively re-enroll during the next open enrollment period, some employers will drop your FSA, so check your employer's policy.

Can I open an FSA if I am self-employed?

No. FSAs are only available through employers. If you are self-employed, you cannot open an FSA. However, you may be able to open an HSA if you are enrolled in a high-deductible health plan, or you can deduct certain medical expenses on your tax return.