Flexible Spending Account (FSA)
An employer-sponsored US account that lets employees set aside pre-tax dollars for medical or dependent-care expenses, with a use-it-or-lose-it annual deadline.
A Flexible Spending Account (FSA) is an employer-sponsored, payroll-deducted account funded with pre-tax dollars. Contributions reduce taxable wages — saving income tax and FICA, the same way HSA payroll contributions do. The catch is the use-it-or-lose-it rule: most of the contribution must be spent on qualified expenses within the plan year or be forfeited.
Two main types:
- Healthcare FSA: 2026 contribution limit $3,300. Reimburses qualifying medical, dental, and vision expenses for the employee and dependents. Cannot be combined with an HSA (because that would defeat HDHP requirements), although a Limited-Purpose FSA covering only dental/vision is HSA-compatible.
- Dependent Care FSA: 2026 limit $5,000 (married filing jointly or single) / $2,500 (married filing separately). Reimburses child-care costs for kids under 13 or care for incapacitated dependents.
Forfeiture mitigations vary by plan: some allow a carryover of up to $660 (2026) of unused healthcare FSA balance into the next year; others offer a 2.5-month grace period to spend the prior year’s balance. Plans can offer one or the other but not both.
FSAs are most useful for predictable, plannable expenses — orthodontics, glasses, daycare. Use the paycheck calculator to see how an FSA election affects take-home pay.
Published 10 May 2026