A Flexible Spending Account lets you set aside pretax money from your paycheck to pay for medical costs your insurance doesn't cover

An FSA is a savings account you control through your employer. Money goes in pretax — meaning it reduces your taxable income — and comes out to pay for things like copays, deductibles, prescription costs, dental work, and vision care. You decide how much to contribute each year during your employer's open enrollment period, usually in October or November. That money sits in the account until you spend it on may have access to medical expenses.

The account is "yours" in the sense that you manage it and decide what to spend it on, but it belongs to your employer legally. If you leave the job, the account closes and any money left in it is forfeited — you cannot take it with you or roll it into another account. This is the biggest difference between an FSA and a Health Savings Account (HSA), which you own outright and can carry between jobs.

Key Takeaways

  • You contribute pretax money through payroll deduction, which lowers your taxable income for the year.
  • You can only spend FSA money on may have access to medical expenses: copays, deductibles, prescriptions, dental, vision, and certain medical equipment.
  • Any money left in the account at the end of the year is lost — you cannot carry it forward or get it back as a refund.
  • You request reimbursement by submitting receipts to your FSA administrator, or you use a debit card linked to the account if your plan offers one.
  • You can change your contribution amount only during open enrollment or if you have a may have access to life event like a birth, marriage, or job loss.

How money flows in and out of an FSA

You choose a contribution amount during open enrollment — typically between $110 and $3,200 per year, though the maximum changes annually. That amount is divided by the number of pay periods left in the year, and your employer deducts that portion from each paycheck before taxes are calculated. So if you contribute $1,200 and get paid 24 times per year, $50 comes out of each check.

The money goes into an account managed by a third-party administrator — often a company like Conduent, Alegeus, or WageWorks. You can then spend it on may have access to medical costs. Some FSA plans give you a debit card tied to the account; you swipe it at the pharmacy or doctor's office and the money comes out automatically. Other plans require you to pay out of pocket and then submit receipts for reimbursement. Either way, the money must be spent on something the IRS considers a may have access to medical expense.

If you use a debit card, the administrator may ask you to submit a receipt after the purchase to confirm it was a may have access to expense. If you do not submit proof, they can freeze the card or demand repayment. If you pay out of pocket, you keep the receipt and submit it to the administrator through their website or app, usually within 30 to 90 days of the purchase.

What counts as a may have access to medical expense

may have access to expenses include copays and coinsurance, deductibles, prescription medications, dental work (cleanings, fillings, root canals, orthodontia), vision care (eye exams, glasses, contacts, contact solution), and certain medical equipment like crutches, hearing aids, and blood pressure monitors. Over-the-counter medications like ibuprofen or allergy pills now count only if you have a prescription for them — the rules tightened in 2020.

Expenses that do not count include health insurance premiums (with rare exceptions), cosmetic procedures, gym memberships, vitamins without a prescription, and most wellness products. If you are unsure whether something qualifies, your FSA administrator's website usually has a searchable database of approved and denied items, or you can call them to ask before you spend the money.

The use-it-or-lose-it rule and the grace period

Any money left in your FSA at the end of the plan year is forfeited. You do not get it back, and it does not roll over to next year. This is called the use-it-or-lose-it rule, and it is why choosing the right contribution amount matters. Contribute too much and you waste money; contribute too little and you miss the tax savings.

Some employers offer a grace period — usually 2.5 months into the new year — during which you can still spend money from the previous year's account. Not all employers offer this, so check your plan documents. A few employers also offer a carryover option that lets you carry up to $570 (the amount changes yearly) into the next year, but this is less common and you cannot have both a grace period and a carryover.

The best strategy is to estimate your medical costs for the coming year as accurately as you can. Look at what you spent last year on copays, prescriptions, and dental work. If you have a planned procedure coming up, factor that in. Then contribute an amount you are confident you will spend.

How to request reimbursement

If your FSA uses a debit card, you simply swipe it at the point of sale and the transaction is complete. The administrator may follow up asking for a receipt; keep all receipts for at least three years in case of an audit.

If you pay out of pocket, log into your FSA administrator's website or mobile app and submit a reimbursement request. You will need to upload an itemized receipt showing the date, the provider name, the service or item, and the cost. A credit card statement alone is not enough — the receipt must show what you actually bought. Once you submit, reimbursement typically arrives in three to five business days via direct deposit or check.

Keep receipts even after reimbursement. The IRS can audit FSA accounts, and you need proof that the money went to may have access to expenses. Many people photograph receipts and store them in a folder on their phone or computer.

FSA versus HSA: when to choose each

An HSA is available only if you have a high-deductible health plan (HDHP). An FSA works with any health plan. The key difference is ownership: you own an HSA and can take it with you when you change jobs; an FSA belongs to your employer and closes when you leave. An HSA also lets you carry money forward indefinitely, while an FSA has the use-it-or-lose-it rule.

If your employer offers both, an HSA is usually the better choice because of the portability and the ability to save long-term. But if you do not have an HDHP, or if you prefer to spend down medical costs each year rather than save them, an FSA works fine. Some people contribute to both if they have access to both — they max out the HSA first, then use the FSA for additional medical costs.

What happens to your FSA when you leave your job

Your FSA account closes on your last day of employment. Any money remaining in the account is forfeited and goes back to your employer. You cannot withdraw it, transfer it, or roll it into an HSA or another FSA at a new job. This is a hard rule with no exceptions.

If you are planning to leave a job, try to spend down your FSA balance before your final day. If you have a large balance and a known medical expense coming up, schedule it before you leave if possible. If you are being laid off or fired unexpectedly, you lose whatever is left — this is one reason to be conservative with FSA contributions if your job feels unstable.

When you start a new job with FSA coverage, you can open a new FSA account during that employer's open enrollment period. The contribution limits and rules are the same, but it is a completely separate account with no connection to your previous one.

Frequently Asked Questions

Can I change my FSA contribution mid-year?

Only if you have a may have access to life event: marriage, divorce, birth or adoption of a child, death of a spouse or dependent, significant change in health coverage, or loss of job-based coverage. You have 30 to 60 days from the event to request a change. Routine changes happen only during open enrollment.

What if I submit a receipt and the administrator says it does not count?

Ask them to explain which part of the expense is not may have access to. Sometimes a single receipt includes both may have access to and non-may have access to items — for example, a pharmacy receipt with both prescription and over-the-counter items. You may be able to resubmit with a breakdown showing only the may have access to portion.

Can I use my FSA for my spouse or children?

Yes, if they are covered under your health plan. You can use FSA money for any family member on your policy. You cannot use it for a spouse or child not on your plan, even if you support them financially.

What if I move to a different state mid-year?

Your FSA continues to work the same way. may have access to medical expenses are defined by federal tax law, not state law, so the rules do not change. If you move and change jobs, your old FSA closes and you lose any remaining balance.

Can I use FSA money for mental health or therapy?

Yes. Copays for therapy sessions, psychiatry visits, and mental health treatment are may have access to expenses. Prescription medications for mental health conditions also count. This includes both in-network and out-of-network providers.