A health care FSA 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) for health care is an employer-sponsored plan where you contribute money before taxes are taken out, then use that money to pay for out-of-pocket medical costs. The money comes directly from your paycheck, reduces your taxable income, and sits in an account you control. You decide how much to contribute each year during your employer's open enrollment period, and you decide when and how to spend it on covered expenses.

The core mechanic is straightforward: money in, money out, tax savings. But FSAs have strict rules about timing, contribution limits, and what counts as a covered expense. Understanding those rules matters because money left unspent at the end of the plan year is typically forfeited—you cannot roll it over to the next year or take it with you if you leave your job.

Key Takeaways

  • You contribute pre-tax money through payroll deduction, which lowers your taxable income and the taxes you owe that year.
  • FSA money can pay for deductibles, copays, prescriptions, dental work, vision care, and other medical expenses your insurance does not cover.
  • You must decide your contribution amount during open enrollment each year, and that money is locked in—you cannot change it mid-year except during may have access to life events.
  • Money left unspent by the end of the plan year is forfeited; most plans do not allow rollovers or carryover to the next year.
  • FSAs are separate from Health Savings Accounts (HSAs) and have different rules about contribution limits, may be able to access, and what happens to unused funds.

How money flows in and out of your FSA

When you enroll in an FSA, you tell your employer how much to deduct from your paycheck each pay period. That money goes into your FSA account before federal income tax, Social Security tax, and Medicare tax are calculated. If you contribute $2,400 per year and earn $50,000, your taxable income drops to $47,600. You pay taxes on the lower amount, which means you owe less in federal and payroll taxes that year.

When you have a medical expense, you pay for it out of pocket, then submit a claim to your FSA administrator with a receipt or explanation of benefits. The administrator reimburses you from your FSA balance. Some employers issue FSA debit cards that work like a regular debit card at pharmacies and medical offices, so you do not have to submit a claim every time. Either way, the money comes from your account, not from your employer's pocket.

Your FSA administrator is usually a third-party company hired by your employer—names like HealthEquity, WageWorks, or Conduent are common. You access your account through their website or app to check your balance, submit claims, and see your transaction history.

What expenses your FSA can cover

FSA money covers medical, dental, and vision expenses that are not fully paid by insurance. The IRS maintains a list of may be able to access expenses, and it is longer than most people expect. Copays and coinsurance count. Deductibles count. Prescription medications count. Dental work—fillings, crowns, orthodontia, cleanings—counts. Vision care—glasses, contacts, eye exams—counts.

Over-the-counter items count too, but only if they treat a specific medical condition and you have a prescription or a letter from your doctor. Aspirin for a headache does not count. Aspirin prescribed by your doctor for heart health does. Sunscreen does not count. Sunscreen prescribed for a skin condition does. Vitamins do not count unless prescribed for a diagnosed deficiency.

Expenses that do not count include cosmetic procedures, gym memberships, general wellness products, and insurance premiums (with narrow exceptions for COBRA and long-term care insurance). If you are unsure whether an expense qualifies, your FSA administrator's website usually has a searchable database of may be able to access items, or you can call and ask before you spend the money.

Contribution limits and the use-it-or-lose-it rule

The IRS sets a maximum FSA contribution limit each year. For 2024, the limit is $3,200 per person. Your employer may set a lower limit, but cannot go higher. You choose your contribution amount during open enrollment, usually in November or December for a plan year that starts January 1. Once you make that choice, you are locked in for the entire year.

The critical rule is the use-it-or-lose-it provision. Money you do not spend by the end of the plan year is forfeited. You cannot roll it over to next year, and you cannot take it with you if you leave your job. Some employers offer a grace period of up to 2.5 months into the next year to spend remaining funds, but this is optional and not all employers offer it. A few employers allow a carryover of up to $610 per year, but this is rare.

Because of this rule, you need to estimate carefully how much medical spending you will actually have. Overestimate and you lose money. Underestimate and you pay out of pocket for expenses you could have covered with pre-tax dollars. Many people contribute a conservative amount—enough to cover predictable costs like copays and prescriptions, but not so much that they risk forfeiting unused funds.

FSA versus HSA: the key differences

FSAs and HSAs are both tax-advantaged accounts for medical expenses, but they work differently and have different rules. An FSA is employer-sponsored only; you cannot open one on your own. An HSA is tied to a high-deductible health plan (HDHP) and you can open one independently or through your employer.

FSA money must be spent each year or it is lost. HSA money rolls over indefinitely—you can let it grow year after year and spend it whenever you want, even in retirement. FSA contribution limits are higher ($3,200 for 2024), but HSA limits are lower ($4,150 for individual coverage in 2024) and you can only contribute if you are enrolled in an HDHP. If you have an FSA, you cannot have an HSA in the same year.

Both reduce your taxable income and let you pay for medical expenses with pre-tax dollars. Both cover the same types of medical expenses. The main trade-off is flexibility: HSAs give you more control and let you keep unused money, but you need a high-deductible plan to may have access to. FSAs are available to anyone whose employer offers one, but you lose unused money at year-end.

When you can change your FSA contribution

You choose your FSA contribution amount once per year during open enrollment. You cannot change it mid-year unless you have a may have access to life event. The IRS defines these narrowly: marriage, divorce, birth or adoption of a child, death of a spouse or dependent, significant change in health coverage, or loss of coverage. A job change, a raise, or a change in your medical needs does not may have access to.

If you have a may have access to event, you typically have 30 to 60 days to notify your employer and adjust your contribution. The change takes effect the next pay period. If you do not have a may have access to event and you try to change your contribution mid-year, your employer will reject the request. This is why getting the contribution amount right during open enrollment matters so much.

What happens to your FSA when you leave your job

If you leave your job, your FSA account closes. Any money remaining in the account is forfeited—your employer keeps it. You cannot transfer the balance to a new employer's FSA or to an HSA. You can continue to submit claims for expenses you incurred while you were employed, but only if you submit them before the important date (usually 90 days after your employment ends). After that, the account is closed and no new claims are accepted.

If you are leaving your job and have unused FSA funds, you may want to spend them before your last day. Schedule any medical appointments, fill prescriptions, or purchase may be able to access items before your employment ends. Once you leave, that money is gone.

How to enroll and manage your FSA

FSA enrollment happens during your employer's open enrollment period, usually once per year in the fall. Your employer will send you enrollment materials—either on paper or through an online benefits portal—with information about the FSA plan, contribution limits, and the administrator's contact information. You choose your contribution amount and submit your election.

After enrollment, you manage your account through your FSA administrator's website or mobile app. You can check your balance, submit claims with receipts, view your transaction history, and update your contact information. Most administrators allow you to submit claims online by uploading a photo of your receipt, or by mail if you prefer. Reimbursement typically takes 5 to 10 business days after the administrator receives and approves your claim.

Keep receipts and explanations of benefits for all medical expenses you claim. The administrator may ask for proof that an expense is may be able to access, and you need documentation to back up your claim. If you lose a receipt, some providers will issue a duplicate, or your insurance company can provide an explanation of benefits showing what you paid out of pocket.

Frequently Asked Questions

Can I use my FSA for my spouse or children?

Yes. FSA money can pay for medical expenses of you, your spouse, and any dependent children, regardless of whether they are covered under your health insurance plan. You do not need to be the one receiving the treatment—the money just needs to go toward may be able to access medical expenses for someone in your household.

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

The unused money is forfeited. Your employer keeps it. Some employers offer a grace period of up to 2.5 months into the next year to spend remaining funds, but this is optional. Check your plan documents to see if your employer offers a grace period. If not, you lose any unspent balance.

Can I get my FSA money back if I do not use it?

No. FSA funds are forfeited if unused by the end of the plan year. This is a rule set by the IRS, not by your employer or administrator. The only exception is if your employer offers a grace period or carryover, which is rare. Plan your contribution carefully to avoid losing money.

Do I pay taxes on FSA reimbursements?

No. FSA reimbursements are not taxable income. You already received the tax benefit when the money was deducted from your paycheck before taxes. When you spend it on may be able to access medical expenses, you receive the money back tax-free.

Can I have both an FSA and an HSA at the same time?

No. If you are enrolled in an FSA, you cannot contribute to an HSA in the same year. However, if your employer offers both and you are may be able to access for an HSA (enrolled in a high-deductible health plan), you can choose one or the other, or switch between them in future years during open enrollment.