An FSA is a tax-advantaged account your employer sets up so you can pay medical expenses with pre-tax dollars

A Flexible Spending Account (FSA) lets you set aside money from your paycheck before taxes are taken out, then use that money to pay for may be able to access medical, dental, and vision expenses. Your employer deducts the amount you choose directly from your gross pay across the year, which lowers your taxable income. You then submit receipts to your FSA plan administrator and get reimbursed, or you use a debit card linked to the account at the point of sale.

The tax savings come from not paying federal income tax, Social Security tax, or Medicare tax on the money you contribute. If you set aside $2,500 in an FSA and your combined tax rate is 25 percent, you save roughly $625 in taxes on that money. That is the main reason to use an FSA instead of paying medical bills out of pocket.

FSAs are offered through your employer's benefits plan, not through the government or a bank. You can only open one during your company's open enrollment period, usually once a year in the fall. If you change jobs or lose coverage, you have a limited window—usually 30 to 60 days—to open an FSA with your new employer if they offer one.

Key Takeaways

  • You contribute pre-tax dollars to an FSA through payroll deduction, which reduces your taxable income and the taxes you owe.
  • You can use FSA funds for copays, deductibles, prescriptions, dental work, vision care, and other IRS-approved medical expenses, but not for insurance premiums or over-the-counter medications without a prescription.
  • Most FSAs have a "use-it-or-lose-it" rule: money you do not spend by the end of the plan year (usually December 31) is forfeited, though some plans allow a grace period or carryover of up to $610.
  • You must enroll during your employer's open enrollment period, and you cannot change your contribution amount mid-year unless you have a may have access to life event like marriage, birth, or loss of coverage.
  • FSAs are separate from Health Savings Accounts (HSAs) and have different rules; you cannot have both in the same year if your health plan is HSA-may be able to access.

What expenses you can and cannot pay with FSA money

The IRS maintains a list of approved medical expenses. You can use FSA funds for copays, coinsurance, deductibles, and out-of-pocket costs for doctor visits, hospital stays, surgery, and mental health care. Prescription medications, insulin, and allergy medications are covered. Dental work—fillings, cleanings, root canals, orthodontia—qualifies. Vision expenses including eye exams, glasses, contact lenses, and laser eye surgery are may be able to access.

Over-the-counter medications like ibuprofen, cold medicine, and antacids are not covered unless you have a prescription from a doctor. Vitamins and supplements are not covered. Health insurance premiums themselves—whether for medical, dental, or vision—cannot be paid with FSA money. Cosmetic procedures, gym memberships, and weight-loss programs do not may have access to. Sunscreen, toothpaste, and other personal hygiene items are not may be able to access, even if they are used to prevent or treat a medical condition.

Some expenses fall into gray areas. Hearing aids and batteries are covered. Crutches, wheelchairs, and other durable medical equipment are covered. Acupuncture and chiropractic care may be covered if they treat a diagnosed condition and your health plan includes them. If you are unsure whether an expense qualifies, ask your FSA plan administrator before you spend the money—they can give you a written ruling.

How much you can contribute and the annual limit

For 2024, the maximum FSA contribution is $3,200 per year. For 2025, it increases to $3,300. This limit applies to you as an individual; if both you and your spouse work and both have access to an FSA through your employers, you can each contribute up to the annual limit through your own employer's plan.

You decide how much to contribute during open enrollment, and that amount is divided by the number of pay periods in your plan year. If you contribute $2,400 and you are paid biweekly over 26 pay periods, $92.31 comes out of each paycheck. The money goes into your FSA account and sits there until you spend it or submit a reimbursement claim.

You cannot change your contribution mid-year unless you have a may have access to life event: marriage, divorce, birth or adoption of a child, loss of health coverage, a significant change in your spouse's benefits, or a substantial change in your medical or dependent care needs. Your employer's benefits administrator determines what counts as may have access to; the rules vary by company.

The use-it-or-lose-it rule and carryover options

Most FSA plans follow a strict "use-it-or-lose-it" rule: any money you do not spend or submit a claim for by the end of the plan year is forfeited. You do not get it back, and it does not roll over to the next year. This is the biggest drawback of an FSA compared to an HSA. If you contribute $2,500 and only spend $1,800, you lose $700.

Some employers offer a grace period of up to 2.5 months after the plan year ends. During this grace period, you can submit claims for expenses you incurred during the plan year. If your plan year ends December 31, a grace period extends the deadline to March 15 of the following year. Not all employers offer this, so check your plan documents.

A smaller number of employers allow you to carry over up to $610 (for 2024) or $680 (for 2025) to the next plan year. Carryover and grace period are different: carryover lets you keep the money; a grace period just gives you more time to submit claims for money you already spent. Some plans offer one, some offer both, and some offer neither. Read your plan summary or ask your benefits administrator which option applies to you.

How to submit claims and get reimbursed

There are two ways to access your FSA money. The first is a debit card issued by your FSA plan administrator. You use it like a regular debit card at pharmacies, doctor offices, and other providers. The card is linked to your FSA account, and the transaction is deducted from your balance. Some providers, especially smaller offices, may not accept FSA debit cards, so this method does not work everywhere.

The second method is to pay out of pocket and then submit a claim for reimbursement. You pay the medical provider with your personal money, collect the receipt, and submit it to your FSA plan administrator through their website, app, or by mail. The administrator reviews the receipt to confirm it is for an may be able to access expense, then deposits the reimbursement into your bank account. This usually takes 5 to 10 business days.

Keep all receipts and explanation of benefits (EOB) statements from your insurance. Your FSA administrator may ask for proof that you paid the expense and that it was not already covered by insurance. If you use the debit card, the administrator may randomly request receipts to verify that the purchase was may be able to access. If you cannot provide proof, you may have to repay the reimbursement.

FSA versus HSA: which one you can use

An FSA and an HSA are both tax-advantaged accounts for medical expenses, but they have different rules and you cannot have both in the same year. If your employer offers a high-deductible health plan (HDHP), you are may be able to access for an HSA. If your employer offers a traditional health plan, you are may be able to access for an FSA. Some employers offer both types of plans; you choose one during open enrollment.

The key difference: an HSA has no use-it-or-lose-it rule. Money you do not spend rolls over to the next year and grows indefinitely. An HSA also lets you invest the money in stocks and bonds, turning it into a long-term savings vehicle. An FSA is designed for near-term expenses and forfeits unused money. An HSA has higher contribution limits ($4,150 for individual coverage in 2024) but requires you to be enrolled in an HDHP. An FSA has lower contribution limits but works with any health plan your employer offers.

If you have access to an HSA and expect to have significant medical expenses, an HSA is usually the better choice because you do not lose unused money. If you have access only to an FSA, or if you prefer a traditional health plan over an HDHP, an FSA lets you still save on taxes for predictable medical costs.

What happens to your FSA if you leave your job

When you leave your job, your FSA coverage ends on your last day of employment or on the date your employer's plan year ends, whichever comes first. Any money remaining in your account is forfeited—you cannot take it with you, and you do not get a refund. This is true even if you have already submitted claims that have not been reimbursed yet.

If you have pending claims, submit them before your coverage ends. Some administrators allow you to submit claims for a short period after your coverage ends, but do not count on it. Once your FSA is closed, you cannot access the money.

If your new employer offers an FSA, you can enroll during their open enrollment period or immediately if you are a new hire. You will start fresh with a new account and a new contribution limit. The money from your old FSA does not transfer. If you are between jobs or your new employer does not offer an FSA, you may be able to open an HSA if you enroll in an HDHP, or you can pay medical expenses out of pocket until you have access to another FSA or HSA.

Frequently Asked Questions

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

Most major pharmacies and large medical providers accept FSA debit cards, but not all. Smaller practices, some dentists, and independent providers may only accept cash or insurance. If a provider does not accept the card, pay out of pocket and submit a claim for reimbursement instead. Always ask before you assume the card will work.

What happens if I submit a claim for an ineligible expense?

If your FSA administrator determines an expense does not may have access to, they will deny the claim and you will not be reimbursed. If you have already been reimbursed and the administrator discovers the expense was ineligible during a later audit, you may be asked to repay the money. Keep receipts and ask your administrator if you are unsure whether an expense qualifies before you submit a claim.

Can I change my FSA contribution amount if my medical needs change mid-year?

No, unless you have a may have access to life event. A change in your medical condition alone does not may have access to. You can only change your contribution during open enrollment or if you experience marriage, divorce, birth, adoption, loss of coverage, or another event your employer recognizes as may have access to.

If I have a grace period, can I spend money from next year's FSA on this year's expenses?

No. A grace period extends the deadline for submitting claims for expenses you already incurred during the current plan year. It does not let you use next year's money. You can only submit claims for expenses from the current plan year during the grace period.

What if my employer changes or cancels their FSA plan?

If your employer cancels the FSA, you typically have until the end of the plan year to spend your balance or submit claims. Money you do not spend is forfeited. If your employer switches to a different FSA administrator, your balance usually transfers to the new administrator and the rules remain the same. Ask your benefits administrator what happens to your account if the plan changes.