How Much to Contribute to Your FSA Each Year

Start with your expected health care costs, not the maximum

The amount you should put in your FSA depends on what you actually spend on health care in a typical year, not on how much the IRS allows you to set aside. For 2024, the maximum contribution is $3,300 for individual coverage. But contributing the maximum makes sense only if you will actually use that much on may be able to access expenses before the plan year ends.

The real calculation is simpler: add up what you paid out of pocket last year for copays, coinsurance, deductibles, prescriptions, dental work, vision care, and other may be able to access medical expenses. That number — or something close to it — is what you should contribute this year. If you spent $1,500 on health care costs last year, contributing $1,500 is the right move. If you spent $3,500, you cannot put in more than $3,300, so you would contribute the maximum and cover the rest from other money.

The catch is that FSA money you do not use by the end of the plan year is gone. You cannot roll it over to next year, and you cannot get it back. This is called the "use-it-or-lose-it" rule, and it is the single most important thing to understand when deciding how much to contribute.

Key Takeaways

• Contribute only what you expect to spend on may be able to access health care costs during the plan year, because unused money is forfeited at year-end.
• The 2024 maximum contribution is $3,300 for individual coverage, but the maximum is not the right target unless you will spend that much.
• Track your actual out-of-pocket health care spending from the past year to estimate what you will need this year.
• If you have a dependent care FSA as well, calculate those costs separately — they have their own contribution limit of $5,000 per household.
• Most employers allow you to change your FSA contribution only during open enrollment or if you have a may have access to life event like a birth or job change.

How to estimate your actual health care spending

The easiest way to get a real number is to look at what you paid out of pocket last year. Pull up your insurance statements from the past 12 months and add up every copay, every coinsurance amount you paid after a visit, every deductible you met, and every prescription you filled. Include dental cleanings, vision exams, glasses, contact lenses, and hearing aids. Include over-the-counter items that count as FSA-may be able to access: pain relievers, allergy medicine, antacids, bandages, and many others.

If you are new to your job or did not have health insurance last year, look at your family's typical spending. If someone in your household has a chronic condition that requires regular prescriptions or visits, factor that in. If you are planning a surgery or major dental work this year, add that cost. If you are pregnant and due during the plan year, include the out-of-pocket costs you expect to pay for delivery and prenatal care.

Be conservative. It is better to contribute less and have money left over in your regular account than to contribute too much and lose FSA funds. You can always pay some may be able to access expenses out of pocket if your FSA runs low.

Why the maximum is usually too much

The $3,300 limit exists because the IRS sets a ceiling on how much pre-tax money you can set aside for health care. But that ceiling is not a target. Most people spend less than $3,300 on out-of-pocket health care in a year, especially if their insurance plan has a low deductible or if they are generally healthy.

If you contribute $3,300 and only spend $2,000, you lose $1,300. That $1,300 was money you earned but never got to use. It goes back to your employer or to the insurance company running the FSA, depending on your plan. There is no exception, no carryover, and no way to get it back.

The only time the maximum makes sense is if you know for certain you will spend at least that much. This might be true if you have multiple family members with ongoing prescriptions, if you wear glasses and contacts and have dental work planned, or if you are having a major procedure this year.

Account for changes in your health or coverage

Your health care spending can shift year to year. If you had a surgery last year that required months of physical therapy, you might not need that this year. If you are starting a new medication, you might spend more on prescriptions. If your family is growing, you will have new costs.

Think about what is different this year compared to last. Did you hit your deductible every year, or was last year unusual? Are you switching to a plan with a higher or lower deductible? Did you have a one-time expense like dental implants or vision correction that will not repeat? Will you be pregnant or have a new baby this year?

If you are unsure, choose a number in the middle of your recent range rather than the maximum. A contribution of $2,000 to $2,500 covers most people's routine health care costs and leaves room for unexpected expenses without the risk of forfeiting a large amount.

Dependent care FSA has a separate limit and calculation

If you use your FSA for dependent care — paying for daycare, after-school programs, or summer camp so you can work — that has its own contribution limit of $5,000 per household per year (or $2,500 if you are married and file taxes separately). This limit is separate from your health care FSA limit, so you can contribute to both.

Calculate dependent care spending the same way: add up what you paid last year for care that allowed you to work. If you paid $8,000 for daycare, you can contribute the maximum $5,000 to your dependent care FSA and pay the remaining $3,000 from other money. If you paid $3,000, contribute $3,000.

Dependent care FSA also has the use-it-or-lose-it rule, so the same caution applies. Do not contribute more than you expect to spend.

What to do if you overestimate or underestimate

If you contribute too much and realize mid-year that you will not spend it all, you have limited options. Most plans do not let you lower your contribution until the next open enrollment period, which is usually in the fall. Some employers offer a grace period of up to two and a half months after the plan year ends to spend remaining FSA money, but this is optional and not all plans have it. Check your plan documents or ask your benefits administrator whether your plan includes a grace period.

If you contribute too little and run out of FSA money before year-end, you can pay may be able to access expenses out of pocket. You cannot increase your FSA contribution mid-year unless you have a may have access to life event — a birth, adoption, marriage, divorce, loss of coverage, or significant change in your dependent care costs. A job change or move to a new state also qualifies. Your employer will tell you what counts as a may have access to event and how to request a change.

Frequently Asked Questions

Can I change my FSA contribution amount after I enroll?

Only if you have a may have access to life event like a birth, marriage, divorce, adoption, or loss of health coverage. Otherwise, you are locked into your contribution for the entire plan year. Some employers allow changes during a special enrollment period if your circumstances change significantly, so check with your benefits team.

What happens to money left in my FSA at the end of the year?

It is forfeited. You lose access to it. Some plans offer a grace period of up to two and a half months after the plan year ends to spend remaining funds, but this is not may provide. Check your plan documents to see if yours includes a grace period.

Should I contribute the maximum if I am not sure how much I will spend?

No. Contributing the maximum is risky if you are unsure. Contribute based on what you actually spent last year or what you realistically expect to spend this year. It is better to have money left in your regular account than to forfeit FSA funds.

Can I use my FSA for my spouse or children?

Yes, if they are covered under your health insurance plan. You can use FSA money for any family member on your policy. Dependent care FSA covers care for children under 13 or a disabled dependent of any age, as long as the care allows you to work.

What if my health care costs spike unexpectedly during the year?

If you run out of FSA money, you pay the remaining costs out of pocket. You cannot increase your FSA contribution mid-year unless you have a may have access to life event. This is another reason to be conservative with your initial contribution — leave some room for unexpected expenses.