A healthcare flexible spending account (FSA) is a workplace benefit that lets you set aside pre-tax money to pay for medical costs your insurance doesn't cover

You choose how much to contribute each year—usually between $100 and $3,200, depending on your employer's plan—and that money comes out of your paycheck before taxes are calculated. When you have a medical expense, you submit a receipt or claim form to the FSA administrator and get reimbursed from your account. 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) goes back to your employer. You cannot carry it forward to next year.

An FSA is different from an HSA because it doesn't require a high-deductible health plan, it's not portable if you leave your job, and the contribution limits are lower. But it works the same way as an HSA for the actual spending: you pay for may be able to access medical costs with pre-tax dollars and keep your receipts.

Key Takeaways

  • You contribute pre-tax money through payroll deduction, which lowers your taxable income and the taxes you owe that year.
  • You can use FSA funds to pay for copays, deductibles, prescription drugs, 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 (usually 2.5 months) or a carryover of up to $640.
  • You must submit receipts or claim forms to get reimbursed; the FSA administrator does not automatically know what you spent.
  • If you leave your job, you lose access to the FSA and cannot transfer the remaining balance to a new employer's plan.

What counts as an may be able to access FSA expense

The IRS maintains a list of medical costs you can pay for with FSA money. These include copays and coinsurance, deductibles, prescription medications, dental fillings and cleanings, vision exams and glasses, hearing aids, and certain medical equipment like crutches or blood pressure monitors. Over-the-counter medications (like ibuprofen or allergy pills) also count, but you need a prescription or a doctor's note to use FSA funds for them.

Expenses that do not count include cosmetic procedures, gym memberships, vitamins without a medical condition diagnosis, and most wellness products. If you are unsure whether something qualifies, ask your FSA administrator or check the IRS Publication 502 list before you spend the money.

How to submit a claim and get reimbursed

When you have a medical expense, you have two ways to access your FSA funds. Some employers issue an FSA debit card that works like a regular card at pharmacies, doctor offices, and dental clinics—you swipe it and the cost comes directly from your account. Other employers require you to pay out of pocket and then submit a claim form with your receipt to get reimbursed.

If you use the debit card, keep your receipt anyway. The FSA administrator may ask you to prove the expense was medical and not personal, especially if you used the card at a store that sells both medical and non-medical items. If you submit a claim form, include the receipt, an explanation of what the expense was for, and the date. Most administrators process claims within two to four weeks.

The use-it-or-lose-it rule and how to avoid losing money

At the end of your plan year, any money left in your FSA account is forfeited. This is the biggest risk of an FSA: if you contribute $2,000 and only spend $1,200, you lose $800. Because of this, you need to estimate your medical costs carefully before you choose your contribution amount.

Some employers offer a grace period—usually 2.5 months after the plan year ends—during which you can still submit claims for expenses you had during the plan year. A smaller number of employers allow you to carry over up to $640 to the next year. Check your employer's plan documents to see which option (if any) applies to you. If your employer offers neither, be conservative with your contribution amount, especially if your medical needs are unpredictable.

FSA vs. HSA: which one should you choose

If your employer offers both an FSA and an HSA, the choice depends on your health plan and how much you expect to spend. An HSA requires a high-deductible health plan and has higher contribution limits ($4,150 for individual coverage in 2024, though this varies by year). An HSA is portable—you keep it if you change jobs—and money rolls over forever. An FSA has lower limits, is tied to your job, and you lose unspent money.

If you have a high-deductible plan and expect significant medical costs, an HSA is usually the better choice because you can build savings over time. If you have a traditional health plan or you know you will spend most of what you contribute each year, an FSA works well and gives you an when ready tax break. Some employers let you contribute to both in the same year, though there are limits on how much you can put into an HSA if you also have an FSA.

What happens to your FSA when you leave your job

When you leave your employer, your FSA ends when ready. You cannot take the account with you or transfer it to a new employer's FSA. Any money remaining in your account is forfeited, even if you have unsubmitted claims for expenses you already had.

However, you have a short window to submit claims for expenses that occurred while you were employed. Check your FSA plan documents or ask the administrator how long you have after your employment ends—this is usually 30 to 90 days. If you are moving to a new job with an FSA, you can enroll in the new plan during your new employer's open enrollment period, but you start with a fresh account and a new contribution limit.

How to choose your FSA contribution amount

The hardest part of an FSA is deciding how much to contribute. You need to estimate your medical costs for the coming year: copays for regular doctor visits, prescription refills, dental cleanings, vision exams, and any procedures you know are coming. Add these up and that is a reasonable starting point.

If you are unsure, look at what you actually spent on medical costs last year (check your insurance statements and receipts). If you spent $1,500, contributing $1,500 to your FSA this year makes sense. If your medical needs are unpredictable or you have a new health condition, contribute a smaller amount to avoid losing money. You can only change your contribution during open enrollment or if you have a may have access to life event (marriage, birth of a child, loss of other health coverage).

Frequently Asked Questions

Can I use my FSA for my spouse or children?

Yes. You can use your FSA to pay for medical expenses for your spouse and any dependent children, even if they are not covered under your health insurance plan. The expense must still be may be able to access (copays, prescriptions, dental work, etc.), and you need to keep the receipt.

What if I have leftover FSA money and a grace period?

A grace period gives you extra time—usually until mid-March—to submit claims for expenses you had during the previous plan year. You can only claim expenses from the old year, not the new one. If you still have unspent money after the grace period ends, it is forfeited.

Can I get my FSA money back if I don't use it?

No. The use-it-or-lose-it rule is final. Money you do not spend and do not claim during the plan year (or grace period) goes back to your employer. This is why it is important to estimate carefully and submit claims promptly.

Do I need to submit receipts every time I use my FSA debit card?

Not every time, but you should keep all receipts. The FSA administrator may ask you to prove an expense was medical, especially if you used the card at a pharmacy or store that sells non-medical items. Having the receipt ready speeds up the process.

What if my employer changes FSA administrators mid-year?

Your account balance transfers to the new administrator, and your coverage continues without interruption. You may need to re-register with the new administrator's website or app to submit claims, but your money stays in the account.