A Flexible Spending Account lets you set aside pre-tax money from your paycheck to pay for medical expenses your insurance doesn't cover

An FSA (Flexible Spending Account) is an account offered through your employer where you contribute money before taxes are taken out. You use that money to pay for medical, dental, or vision costs that your health insurance plan doesn't pay for — things like copays, deductibles, prescription costs, and some over-the-counter items. Because the money goes in before taxes, you pay less in federal income tax and payroll tax on the money you contribute.

FSAs are separate from your health insurance plan. Your insurance is what covers major medical events; your FSA covers the out-of-pocket costs that come with that insurance. You control how much money goes into the account each year (within limits set by the IRS), and you decide when to spend it on may be able to access expenses.

Key Takeaways

  • FSA contributions come from your paycheck before taxes, which reduces your taxable income and the amount of tax you owe.
  • You can use FSA money only for medical, dental, vision, and certain over-the-counter expenses that your insurance doesn't cover.
  • The IRS sets an annual contribution limit, which changes each year; for 2024 it is $3,200 for individual coverage.
  • Money left in your FSA at the end of the year is forfeited — you cannot roll it over to the next year or take it as a refund.
  • You must enroll in an FSA during your employer's open enrollment period, usually once per year, and changes outside that window are limited.

How FSA money actually works

When you enroll in an FSA, you tell your employer how much money you want to contribute for the year. That amount is divided by your pay periods, and your employer deducts it from each paycheck before calculating your taxes. The money goes into an account managed by a third-party administrator (often a benefits company or your employer's benefits department).

When you have a medical expense, you pay for it out of pocket and then request reimbursement from your FSA. You submit a claim form along with a receipt or explanation of benefits from your doctor or pharmacy. The FSA administrator reviews it, confirms the expense is may be able to access, and sends you a reimbursement check or deposits the money into your bank account. Some FSAs also issue a debit card that you can use directly at pharmacies or medical offices, though you may still need to submit receipts afterward.

The money in your account is available to you immediately — you do not have to wait until you have contributed the full amount. If you contribute $2,400 for the year, you can request reimbursement for $2,400 in may be able to access expenses in January, even though you have only had one or two paychecks deducted so far.

What expenses you can and cannot pay for with an FSA

The IRS maintains a list of may be able to access medical expenses. Common ones include copays, coinsurance, deductibles, prescription medications, dental work (fillings, cleanings, orthodontia), vision care (glasses, contacts, exams), and hearing aids. Some over-the-counter items are also may be able to access — including pain relievers, allergy medicine, and first-aid supplies — but only if you have a prescription or doctor's note for them.

You cannot use FSA money for health insurance premiums, cosmetic procedures, gym memberships, or general wellness products like vitamins (unless prescribed by a doctor). Expenses for a spouse or dependent who is not claimed on your tax return are also ineligible. If you are unsure whether an expense qualifies, ask your FSA administrator before you submit a claim; they can tell you whether the IRS allows reimbursement for that specific item.

The "use it or lose it" rule and what it means

Money left in your FSA at the end of the calendar year does not roll over to the next year. If you contribute $2,400 and spend only $1,800, the remaining $600 is forfeited — you cannot get it back as a refund, and you cannot carry it forward. This is called the "use it or lose it" rule, and it is set by federal law, not by your employer.

Because of this rule, you need to estimate carefully how much medical expense you will have in the coming year. If you have ongoing prescriptions, regular dental work, or vision care scheduled, add those up and contribute that amount. If you overestimate and lose money, you cannot change your contribution mid-year unless you have a may have access to life event (birth, marriage, loss of coverage, or significant change in medical needs).

Some employers offer a grace period of up to 2.5 months into the new year to spend money from the previous year's FSA. If your employer offers this, you have until mid-March to use any leftover 2023 funds, for example. Ask your benefits administrator whether your plan includes a grace period, because it changes the strategy for how much to contribute.

FSA contribution limits and how they change

The IRS sets a maximum amount you can contribute to an FSA each year. For 2024, the limit is $3,200 for individual coverage. This limit changes most years — the IRS adjusts it for inflation. Your employer will tell you the current limit during open enrollment, and you cannot contribute more than that amount regardless of how much medical expense you expect to have.

If you are married and both you and your spouse work for employers that offer FSAs, you each have your own separate limit. You cannot combine accounts or share contributions. If you change jobs mid-year, your FSA account stays with your former employer's plan; you cannot transfer the balance to a new employer's FSA, though you may be able to continue accessing it through COBRA or a similar continuation plan.

When you can enroll and make changes

You can enroll in an FSA only during your employer's open enrollment period, which is usually once per year and lasts one to three weeks. If you miss open enrollment, you cannot start an FSA until the next year's enrollment period — there is no way to enroll outside that window unless you have a may have access to life event.

may have access to life events include marriage, divorce, birth or adoption of a child, loss of health coverage, or a significant change in your medical or dependent care needs. If one of these happens, you have 30 to 60 days (depending on your employer) to enroll in an FSA or change your contribution amount. You will need to provide documentation — a marriage certificate, birth certificate, or notice of loss of coverage, for example.

How an FSA differs from an HSA

An HSA (Health Savings Account) is similar to an FSA but works differently in important ways. Both let you set aside pre-tax money for medical expenses, but an HSA is only available if you are enrolled in a high-deductible health plan. HSA money rolls over year to year and can be invested, so it works more like a savings account. FSA money does not roll over and cannot be invested — it is use-it-or-lose-it.

If your employer offers both an FSA and an HSA, you can enroll in the HSA but not the FSA in the same year. If you have an HSA, you can still use it to pay for the same may be able to access medical expenses as an FSA. The choice between them depends on your health plan type and how much medical expense you expect to have.

Frequently Asked Questions

Can I use my FSA to pay for my spouse's medical expenses?

Yes, if your spouse is claimed as a dependent on your tax return. You cannot use FSA money to pay for a spouse's expenses if they file taxes separately or are not claimed as your dependent. The same rule applies to children and other dependents — they must be claimed on your tax return for their expenses to be reimbursable through your FSA.

What happens to my FSA money if I leave my job?

The money in your FSA account stays with your former employer's plan. You can continue to submit claims for expenses you incurred while you were employed, but you cannot make new contributions. You may be able to continue the account through COBRA, which lets you keep the FSA for a limited time by paying the full premium yourself. Ask your former employer's benefits department about COBRA continuation options.

Can I change how much I contribute to my FSA during the year?

No, unless you have a may have access to life event like marriage, birth, or loss of coverage. If you do have a may have access to event, you have 30 to 60 days to change your contribution amount. Outside of those windows, your contribution amount is locked in for the entire year.

Do I need receipts to get reimbursed from my FSA?

Yes. You must submit a receipt, invoice, or explanation of benefits showing the date, amount, and type of expense. Some FSA administrators also require a prescription or doctor's note for certain items, especially over-the-counter medications. Keep all receipts until your claim is approved, in case the administrator asks for more information.

Can I use my FSA debit card at any pharmacy or doctor's office?

Most FSA debit cards work at pharmacies and medical offices that accept them, but not all merchants are set up to process FSA payments. If a pharmacy or office does not accept the card, you can pay out of pocket and submit a claim for reimbursement. Some FSA administrators also require you to submit a receipt even when you use the debit card, so keep documentation of all purchases.