A healthcare flexible spending account, also called a flexible spending arrangement (FSA), lets you save for medical expenses with pretax dollars. But you\u2019ll need to understand the rules and qualifications to make it work for you.<\/p>\n An FSA is part of an employer benefits plan. If offered, you typically set it up during your company\u2019s annual open enrollment for the coming plan year. Once you enroll, your employer deducts the amount you choose from your paycheck, and the money accrues in a dedicated account. You\u2019ll submit a claim and be reimbursed as you pay out-of-pocket medical expenses. The reimbursement is tax-free as long as the cost is FSA-eligible.<\/p>\n To be eligible for an FSA, you have to work at an employer offering it. Self-employed individuals are ineligible. You\u2019re also ineligible for a healthcare FSA if you have a health savings account (HSA).<\/p>\n You contribute to your FSA with pretax income \u2014 money that hasn\u2019t been hit by federal income tax or payroll taxes. This lowers your tax bill by reducing your taxable income. Your employer can also contribute to your FSA, accelerating your savings. The Internal Revenue Service (IRS) treats employer and employee contributions the same \u2014 neither counts toward your income.<\/p>\n You can contribute up to $3,300 to your FSA for 2025 \u2014 a $100 increase from tax year 2024. If your spouse has an FSA, you can each set aside the maximum for your FSAs, totaling $6,600 for your household. The annual contribution limit only applies to paycheck deductions, so employer contributions do not impact your annual limit.<\/p>\n The IRS has rules on how and when to use your FSA funds, but it\u2019s also worth checking the details in your employer plan.<\/p>\n You, your spouse, and dependents can generally use FSA funds for medical and dental expenses not covered by your health plan. An FSA-approved cost is for treating or preventing a physical or mental condition \u2014 not for general care like vitamins or spa treatments. Eligible expenses could include:<\/p>\n Medical, dental, and vision expenses that are not covered by your health insurance plan, such as doctor\u2019s office co-pays, coinsurance, and deductibles.<\/p>\n<\/li>\n Prescription drugs and over-the-counter medicines.<\/p>\n<\/li>\n Additional care items that address a medical condition, like bandages, reading and prescription eyeglasses, and pregnancy tests.<\/p>\n<\/li>\n<\/ul>\n Everyday items, regardless of a medical condition, are usually not FSA-eligible. This includes items like floss, vitamins, and cosmetics. You also can\u2019t use FSA money for health insurance premiums or long-term care.<\/p>\n There are two ways to use your FSA money. You can pay out of pocket for healthcare costs and get reimbursed from your FSA by filing a claim.<\/p>\n You may also receive a debit card connected to your FSA that you can use to pay medical expenses directly. This way, you don\u2019t have to pay the costs up front and wait to be reimbursed.<\/p>\n You forfeit any unused funds at the end of the calendar year unless your employer allows an FSA grace period or a carryover.<\/p>\n Grace period:<\/strong> Your employer can let you use the previous year\u2019s funds for qualified expenses accrued that year for up to 2 \u00bd months into the following year.<\/p>\n<\/li>\n Carryover<\/strong>: In 2026, you may be able to use up to $660 of your 2025 balance.<\/p>\n<\/li>\n<\/ul>\n Because an FSA is an employee benefit, you\u2019ll also forfeit your FSA balance if you leave the company.<\/p>\n Learn more: <\/em>FSA vs. HSA: Which account is best for you? <\/em><\/p>\n You may have other ways to save depending on your employer’s benefits. Here are additional tax-advantaged accounts to consider.<\/p>\n Dependent care FSA: <\/strong>Save pretax dollars to cover eligible childcare and other dependent care expenses while you work. This can include daycare, before- and after-school programs, summer day camps, and elderly care.<\/p>\n<\/li>\n Health savings account<\/strong> (HSA):<\/strong> If you have a high-deductible health plan (HDHP), you\u2019re eligible for an HSA. Contributions are tax-deductible and reserved for eligible medical expenses. Unlike an FSA, you don\u2019t need an employer to participate, and you can let your savings sit as long as you want, investing them to grow tax-free to use in retirement.<\/p>\n<\/li>\n<\/ul>\n Read more: <\/em>HSAs \u2014 A retirement plan for your healthcare<\/em><\/p>\n Money in an FSA account does not roll over. You\u2019ll lose any money left in your account at the end of the plan year unless your employer offers a grace period or carryover. With a grace period, you can access your FSA funds for up to 2 \u00bd months into the new year. If your employer offers a carryover, you can roll up to $660 of your 2025 balance into 2026.<\/p>\n You\u2019re eligible for a healthcare FSA if your employer offers one. You generally can\u2019t have a healthcare FSA and an HSA. If you\u2019re a highly compensated employee, you\u2019ll have additional rules.<\/p>\n Both HSAs and FSAs build pretax savings for eligible healthcare expenses. You usually can\u2019t participate in both. FSAs are only offered through an employer, and you generally have to use the money before the end of the year. HSA funds are yours, regardless of where you work. You can use the money for current-year medical costs or invest it to grow over time and take it out \u2014 tax-free \u2014 to pay for medical care after age 65.<\/p>\n An HRA or health reimbursement account is similar to a healthcare HSA in that it\u2019s money you can use for qualified medical expenses. But HRA funds are contributed by your employer, not you. They may carry over from year to year, but you\u2019ll lose them if you leave your job.<\/p>\n<\/p><\/div>\n<\/div>\n<\/div>\n<\/figure>\n
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What is the difference between an HSA and an FSA?<\/h3>\n
What is the difference between an HRA and an FSA?<\/h3>\n