How Much To Contribute To Your FSA Each Year

The amount you contribute to your FSA is entirely your choice, within IRS limits

You decide how much money to set aside in your Flexible Spending Account each year during your employer's open enrollment period. The IRS sets a maximum contribution limit — for 2024, that limit is $3,200 per year for a dependent care FSA and $3,300 per year for a health care FSA. These limits change annually and are announced by the IRS in the fall for the following year. You can contribute anywhere from $0 up to that maximum, and your employer may also set a lower limit of their own.

The key is that you must estimate your actual out-of-pocket expenses for the coming year. Money you don't use by the end of the plan year is forfeited — there is no rollover to the next year (with a narrow exception for health care FSAs, which allow a $640 carryover for 2024). This "use it or lose it" rule makes choosing the right contribution amount one of the most important FSA decisions you'll make.

Key Takeaways

• The IRS limits health care FSA contributions to $3,300 per year and dependent care FSA contributions to $3,200 per year for 2024, with limits increasing slightly most years.
• You choose your contribution amount during open enrollment, and that amount is locked in for the entire plan year unless you have a may have access to life event.
• Any money left unspent at the end of the plan year is forfeited, except for health care FSAs which allow a $640 carryover into the next year.
• To pick the right amount, list your expected out-of-pocket medical or dependent care costs for the next 12 months and contribute only what you reasonably expect to spend.

How to estimate your FSA contribution

Start by gathering your receipts and statements from the past 12 months. Look at what you actually paid out of pocket for may be able to access expenses — copays, deductibles, prescriptions, dental work, vision care, or dependent care. If you have a spouse or partner with their own health insurance, add their out-of-pocket costs too if you file taxes jointly and are considering a joint FSA strategy.

Then adjust that number for what you expect to change in the coming year. Are you planning dental work? Will your child start preschool? Do you expect to hit your deductible again? Will you need new glasses? These are the expenses FSAs actually cover. Don't include insurance premiums, over-the-counter medications (unless prescribed), or cosmetic procedures — FSAs don't cover those.

Be conservative. It's better to contribute less and have money left over in your regular paycheck than to contribute too much and lose money at year-end. Many people contribute $1,000 to $2,500 for health care FSAs and $2,000 to $3,200 for dependent care FSAs, but the right number depends entirely on your household's actual expenses.

The difference between health care and dependent care FSA limits

A health care FSA covers medical, dental, and vision expenses for you and your dependents. The 2024 limit is $3,300 per year. This includes copays, deductibles, prescription drugs, glasses, contacts, dental work, and many other health-related costs. You can carry over up to $640 of unused funds into the next year, which gives you a small cushion against the use-it-or-lose-it rule.

A dependent care FSA covers the cost of childcare, preschool, after-school programs, and adult day care for a dependent you claim on your taxes. The 2024 limit is $3,200 per year. No carryover is allowed — any unused balance is forfeited at year-end. Dependent care FSAs are useful only if you pay for regular care while you work, so estimate based on your actual childcare costs.

You can have both a health care FSA and a dependent care FSA at the same time, and they have separate limits. Some employers offer only one type, so check what your employer offers during open enrollment.

When you can change your FSA contribution

You can only change your contribution amount during your employer's open enrollment period, which typically happens once per year in the fall for coverage starting January 1. Outside of open enrollment, you're locked into your chosen amount for the entire plan year.

The exception is a may have access to life event. If you have a major change in circumstances — birth or adoption of a child, marriage or divorce, significant change in your spouse's income, loss of other health coverage, or a substantial change in your dependent care costs — you may be able to change your FSA contribution mid-year. You typically have 30 to 60 days from the event to request the change, and you must provide documentation to your employer or benefits administrator.

Job loss or a reduction in hours also qualifies as a life event in most plans. If you leave your job, you usually have until the end of the month to spend any remaining FSA balance, or you may lose it.

How FSA contributions affect your paycheck

FSA contributions are deducted from your paycheck before federal income tax, Social Security tax, and Medicare tax are calculated. This means contributing to an FSA reduces your taxable income for the year. If you contribute $2,500 to a health care FSA, you save roughly 20 to 30 percent of that amount in taxes, depending on your tax bracket. That's a real financial benefit, but it's only worth it if you actually spend the money.

Your employer deducts your FSA contribution evenly across each paycheck throughout the year. If you contribute $2,400 and are paid biweekly, your employer deducts $92.31 from each paycheck. The money goes into your FSA account and is available to spend immediately — you don't have to wait until the full amount is deducted.

Common mistakes in choosing an FSA contribution amount

The most common mistake is overestimating expenses and losing money at year-end. People often think "I might need this" and contribute too much, then can't spend it all. The carryover for health care FSAs ($640 for 2024) helps, but dependent care FSAs have no carryover at all. If you're unsure, start lower and increase your contribution next year if you find you're not using it all.

Another mistake is forgetting that FSA money must be spent on may be able to access expenses only. You can't use it for gym memberships, vitamins, cosmetic procedures, or most over-the-counter items (with rare exceptions for things like pain relievers if prescribed). If you contribute expecting to cover these costs, you'll lose the money.

A third mistake is not tracking your spending throughout the year. Many people contribute, then forget they have an FSA and pay out of pocket for may be able to access expenses instead. Keep your FSA debit card or receipts handy, and check your account balance regularly so you know how much you have left to spend before year-end.

Strategies for using your full FSA balance

If you're near the end of the plan year and have money left in your FSA, you can purchase may be able to access items you know you'll need. Stock up on prescription refills, buy glasses or contacts, schedule dental work, or pay for medical equipment. Many FSA plans allow you to submit claims for expenses incurred in December through mid-January, so you have a window to spend money on year-end medical care.

For dependent care FSAs, if you know you'll have unused funds, consider timing larger childcare expenses — summer camp, preschool tuition, or backup care — to fall in the same plan year. Some employers also allow you to use FSA funds to pay for dependent care provider taxes, which can help you spend down the balance.

If you truly cannot spend your FSA balance, accept the loss and adjust your contribution down for next year. Trying to force spending on unnecessary medical items defeats the purpose of the account.

Frequently Asked Questions

Can I contribute to an FSA if I have a high-deductible health plan?

You can contribute to a dependent care FSA with any health plan. However, if you have a high-deductible health plan (HDHP), you cannot contribute to a health care FSA — the IRS does not allow both at the same time. You can instead contribute to a Health Savings Account (HSA), which has higher contribution limits and allows carryover of unused funds.

What happens to my FSA money if I leave my job mid-year?

You lose access to your FSA when you leave your job. You typically have until the end of the month to submit claims for expenses you've already incurred, but any unspent balance is forfeited. You may be able to continue FSA coverage through COBRA, though you must pay the full premium yourself. Check with your employer's benefits administrator about your options.

Can my spouse and I each have our own FSA?

Yes, if you both work and your employers offer FSAs, you can each have separate accounts. However, you cannot both claim the same dependent care expenses — only one of you can claim the cost of childcare on your taxes, and only that person's FSA can be used to pay for it. Coordinate with your spouse to avoid duplication.

Is there a minimum FSA contribution amount?

No. You can contribute $0 if you choose, though most employers require a minimum like $100 or $120 per year if you enroll at all. Check your employer's plan documents or ask your benefits administrator what minimums apply to your plan.

How do I know if an expense is FSA-may be able to access?

The IRS publishes a list of may be able to access medical and dependent care expenses. For health care FSAs, most medical, dental, and vision costs are covered, but cosmetics, gym memberships, and most over-the-counter items are not. For dependent care FSAs, only costs for care provided while you work are may be able to access. Your FSA provider's website usually has a searchable database of may be able to access items, or you can ask before you buy.