The amount you contribute to your FSA depends on your household expenses, tax bracket, and how much you can afford to set aside without hardship

You choose your FSA contribution amount during your employer's open enrollment period, usually once a year in the fall. The money comes out of your paycheck before taxes, which means you save on federal income tax, Social Security tax, and Medicare tax on that amount. The catch: money left in your FSA at the end of the plan year is forfeited — you cannot roll it over or get it back. This "use it or lose it" rule is the single most important factor in deciding how much to contribute.

For 2024, the IRS allows you to contribute up to $3,300 per year to a general-purpose FSA. This limit changes annually and is set by the IRS. If you have a spouse who also has access to an FSA through their employer, you each have your own $3,300 limit — you cannot combine them. Dependent care FSAs (for childcare expenses) have a separate, lower limit of $5,000 per household per year.

Key Takeaways

  • You must choose your FSA amount during open enrollment and cannot change it mid-year except for may have access to life events like a birth, marriage, or job loss.
  • Any money left unspent at the end of the plan year is forfeited, so contribute only what you reasonably expect to use on medical or dependent care expenses.
  • Contributing to an FSA saves you money on taxes, but only if you actually spend the funds on may be able to access expenses before the deadline.
  • The IRS sets annual contribution limits ($3,300 for medical FSAs in 2024), and you should verify the current year's limit with your employer.

How to estimate what you will actually spend

Start by looking at your medical expenses from the past year or two. Pull up your insurance statements, pharmacy receipts, and any out-of-pocket costs you paid. FSAs cover copays, coinsurance, deductibles, prescription medications, and many over-the-counter items like pain relievers, allergy medicine, and first-aid supplies. They do not cover insurance premiums, cosmetic procedures, or general wellness items like vitamins.

Write down recurring costs: if you take a prescription medication that costs $30 per month, that is $360 per year. If you see a specialist four times a year with a $40 copay each visit, that is $160 per year. Add in dental work you know is coming, vision exams, or physical therapy. Be realistic — do not include expenses you hope to have but probably will not.

A common mistake is overestimating. If you contribute $3,300 and only spend $2,000, you lose $1,300. A safer approach is to contribute an amount you are confident you will spend, even if it is lower than the legal limit. Many people start with $1,000 to $1,500 and adjust upward in future years once they see their actual spending patterns.

The tax savings math

Contributing to an FSA reduces your taxable income, which lowers what you owe in federal income tax, Social Security tax, and Medicare tax. The exact savings depends on your tax bracket. If you are in the 22% federal tax bracket and contribute $2,000 to an FSA, you save roughly $440 in federal taxes alone (22% of $2,000). Add state income tax and payroll taxes, and the total savings is often 25% to 40% of your contribution.

This tax savings only matters if you actually spend the money on may be able to access expenses. If you contribute $2,000 and spend only $1,000, you have saved taxes on $1,000 you did not use — and you forfeit the remaining $1,000. The math only works in your favor if you spend what you contribute.

Life events that let you change your contribution mid-year

You normally cannot change your FSA contribution amount after open enrollment ends. However, the IRS allows changes if you experience a may have access to event. These include birth or adoption of a child, marriage or divorce, death of a spouse or dependent, significant change in your spouse's income or benefits, loss of health insurance coverage, or a substantial change in your medical needs.

If you have a may have access to event, you typically have 30 to 60 days to notify your employer's benefits department and request a change. You must explain the event and show documentation if asked. This is the only way to adjust your contribution outside of open enrollment, so keep this option in mind if your circumstances change during the year.

What happens to unspent money

At the end of your plan year, any FSA balance you have not spent is forfeited. Your employer keeps it. There is no grace period, no rollover, and no way to recover it — this is a federal rule that applies to all FSAs. Some employers offer a short grace period (usually 2.5 months into the next plan year) to spend remaining funds, but this is optional and not all employers provide it. Check with your benefits department to see if yours does.

Because of this rule, many people contribute conservatively. If you are unsure whether you will spend $2,500, contribute $1,500 instead. It is better to leave money in your paycheck than to forfeit it. You can always increase your contribution next year if you find you did not spend enough.

Dependent care FSA contribution limits and strategy

If you have children in daycare or after-school care, you may have access to a dependent care FSA through your employer. The annual limit for dependent care FSAs is $5,000 per household per year (or $2,500 if you are married and file taxes separately). This is separate from your medical FSA limit — you can contribute to both at the same time.

Dependent care FSAs are easier to estimate because childcare costs are usually fixed and predictable. If you pay $1,200 per month for daycare, that is $14,400 per year — but you can only contribute $5,000 to the FSA. The FSA covers the first $5,000 of that cost, and you pay the rest with after-tax dollars. Because childcare expenses are so predictable, most people contribute the full $5,000 limit to a dependent care FSA if they have one.

Common mistakes to avoid

The biggest mistake is contributing too much and losing money to forfeiture. People often think "I might need this" and contribute the full $3,300, then spend only $1,500. The second mistake is forgetting to track spending and missing the deadline to submit receipts for reimbursement. Your FSA administrator sets a deadline — usually 60 to 90 days after the plan year ends — to submit claims. After that, you cannot get reimbursed for expenses you already paid.

A third mistake is not knowing what is may be able to access. Over-the-counter medications, menstrual products, and certain medical supplies are FSA-may be able to access, but many people do not realize this and do not claim them. Keep receipts for everything you think might be may be able to access, and ask your FSA administrator if you are unsure. A fourth mistake is assuming your spouse's FSA limit applies to you — each person has their own limit, and you cannot transfer money between accounts.

Frequently Asked Questions

Can I contribute to an FSA if I am self-employed?

No. FSAs are only available through employers. If you are self-employed, you cannot open an FSA through your own business. You may be able to open a Health Savings Account (HSA) if you have a high-deductible health plan, which has similar tax advantages and does not have a "use it or lose it" rule.

What if I change jobs mid-year?

Your FSA ends when you leave your employer. You have until the end of the plan year to submit claims for expenses you incurred while employed. If you move to a new job with an FSA, you start fresh with a new contribution amount and a new plan year — you cannot transfer your old FSA balance to the new one.

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 your spouse and any dependent children on your tax return, even if they are not on your health insurance plan. The money in your FSA is yours to spend on anyone you claim as a dependent.

Is there a minimum contribution amount?

No. Your employer may set a minimum, but the IRS does not. You can contribute as little as $1 per year or as much as the annual limit. Some employers require a minimum of $100 or $200, so check your plan documents.

What if I do not spend all my FSA money by the deadline?

The money is forfeited and you lose it. There is no refund, no rollover, and no exception. This is why it is critical to estimate conservatively and only contribute what you are confident you will spend on may be able to access expenses.