A health care FSA is a savings account your employer offers that lets you set aside pre-tax money to pay for medical expenses

A Flexible Spending Account (FSA) for health care is an account funded with your own money — taken from your paycheck before taxes are withheld. You decide how much to contribute each year, up to a limit set by the IRS. When you need to pay for a doctor visit, prescription, dental work, or other covered medical expense, you withdraw money from the account to pay for it. Because the money goes in before taxes, you pay less in federal income tax and payroll taxes that year.

The account is tied to your job. If you leave your employer, you generally lose the account and any money left in it at the end of the year — there is no rollover to a new job or to a personal savings account. This is the biggest trade-off: you save on taxes, but you have to spend the money or lose it.

Key Takeaways

  • A health care FSA reduces your taxable income by letting you pay for medical expenses with pre-tax dollars, which lowers your federal income tax and payroll taxes.
  • You choose how much to contribute each year during open enrollment, and the money is deducted from your paycheck automatically.
  • You can use FSA money for doctor visits, prescriptions, dental care, vision care, and many other medical expenses, but not for health insurance premiums or cosmetic procedures.
  • Any money left in the account at the end of the year is forfeited — you cannot carry it over to the next year or take it with you if you change jobs.
  • You must have a may have access to life event (like a new job, marriage, or birth) or wait for open enrollment to change your contribution amount.

What medical expenses you can pay for with an FSA

The IRS maintains a list of may have access to medical expenses you can pay for with FSA money. These include doctor visits, hospital stays, surgery, prescription medications, and mental health care. Dental work, vision care (including glasses and contact lenses), and hearing aids are covered. Over-the-counter medications like pain relievers and allergy medicine are also allowed, though you may need a prescription or doctor's note depending on the medication.

Some expenses that sound medical but are not covered include cosmetic procedures (like teeth whitening or Botox), health club memberships, and vitamins or supplements that are not prescribed by a doctor. Health insurance premiums themselves cannot be paid with FSA money, though you can use it for copays and deductibles. If you are unsure whether a specific expense qualifies, your FSA plan administrator can tell you before you spend the money.

How much you can contribute and when

The IRS sets an annual limit on how much you can put into a health care FSA. This limit changes each year — it has been in the $2,500 to $3,200 range in recent years, but you should check your employer's plan documents or the IRS website for the current year's limit. You choose your contribution amount during your employer's open enrollment period, which usually happens once a year in the fall for coverage starting January 1.

The money is deducted from your paycheck in equal amounts throughout the year. If you have a may have access to life event — such as getting married, having a baby, losing other health coverage, or changing jobs — you may be able to change your contribution amount outside of open enrollment. Your employer's human resources or benefits department can tell you whether your situation qualifies.

The "use it or lose it" rule and what happens to leftover money

Money in a health care FSA does not roll over to the next year. If you contribute $2,500 and spend only $2,000, the remaining $500 is forfeited — you cannot get it back as a refund or carry it forward. This is why many people contribute conservatively, estimating only the medical expenses they are confident they will have.

Some employers offer a grace period of up to 2.5 months into the new year during which you can still spend the previous year's leftover money. A few employers also offer a carryover option that lets you keep up to $640 (the amount varies by year) into the next year. Check your plan documents to see if your employer offers either of these options — most do not.

How to use your FSA when you need medical care

When you have a medical expense, you pay for it out of pocket first, then request reimbursement from your FSA plan. You submit a claim form (usually available online through your plan's website or app) along with a receipt or explanation of benefits from your provider. The plan administrator reviews it and sends you the money, typically within one to two weeks.

Some employers issue an FSA debit card that you can use directly at pharmacies, doctor offices, and other providers, so you do not have to pay out of pocket and wait for reimbursement. If your employer offers a card, ask whether it requires you to submit receipts afterward or whether the card is set up to work without additional paperwork. The card is convenient but still subject to the same rules — you can only use it for may have access to medical expenses.

FSA versus HSA: when each one makes sense

If your employer offers both a health care FSA and a Health Savings Account (HSA), they are not the same thing. An HSA is only available if you are enrolled in a high-deductible health plan, and money in an HSA rolls over year to year — you do not lose it. An HSA also lets you invest the money and withdraw it tax-free in retirement for any expense, not just medical ones.

A health care FSA has no investment option and no carryover, but you do not need a high-deductible plan to use one. If you have predictable medical expenses each year (regular prescriptions, ongoing therapy, dental work), an FSA can save you money on taxes. If your medical expenses are unpredictable or you want money to carry over, an HSA is usually the better choice. Some employers let you use both in the same year, though there are rules about how much you can contribute to each.

What happens to your FSA if you leave your job

When you leave your employer, your FSA account closes. Any money remaining in the account is forfeited — you cannot transfer it to a new employer's FSA or take it with you. If you have submitted claims for expenses you incurred before your last day of work, the plan will usually still process those claims, but you need to submit them quickly and follow your plan's deadline for claims.

If you are moving to a new job with health coverage, you can start a new FSA with your new employer during their open enrollment or if you have a may have access to life event. The new account is separate and starts fresh. If you are losing health coverage, you may be able to continue your current FSA under COBRA, though you would pay the full premium yourself plus administrative fees — this is rarely worth it for an FSA.

Frequently Asked Questions

Can I use my FSA for my spouse or children?

Yes. You can use FSA money to pay for may have access to medical expenses for yourself, your spouse, and your dependents — including children, even if they are not claimed on your taxes. The money in the account belongs to you, so you decide how to allocate it among family members.

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

The money is forfeited unless your employer offers a grace period or carryover option. A grace period lets you spend the previous year's money through mid-March of the new year. A carryover lets you keep a small amount (usually $640 or less) into the next year. Check your plan documents to see which, if either, your employer offers.

Can I change my FSA contribution amount during the year?

Only if you have a may have access to life event, such as marriage, divorce, birth of a child, loss of other coverage, or a significant change in your employer's plan. Open enrollment is the standard time to change your amount. Your benefits department can tell you whether your situation qualifies for a mid-year change.

Do I need receipts to use my FSA?

If you use an FSA debit card, you may or may not need to submit receipts afterward — it depends on your plan. If you pay out of pocket and request reimbursement, you will need to submit a receipt or explanation of benefits showing the expense and the amount. Keep receipts for at least three to five years in case the plan audits your claims.

Can I use my FSA for over-the-counter medications?

Most over-the-counter medications are covered if you have a prescription or doctor's note. Pain relievers, allergy medicine, and cold medicine generally may have access to. Vitamins and supplements are usually not covered unless prescribed by a doctor. Ask your plan administrator or check your plan documents if you are unsure about a specific item.