Flexible spending accounts (FSAs): How they work and what they cover

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An FSA can give your budget some flexibility when health care expenses arise.

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A flexible spending account (FSA) is a benefit some employers offer that allows employees to set aside pretax money for qualified health care or dependent care expenses. Many FSAs require you to spend the funds by year-end or forfeit them—use it or lose it—although some plans offer a grace period or allow unused funds to roll over into the next year.

With a health care FSA, your employer deducts money from your paycheck before taxes and deposits it into an account. You can use that money to pay health care costs throughout the year. As long as you use the money for expenses that qualify, you don’t pay taxes on it.

A flexible spending account, also known as a flexible spending arrangement, is an employer-sponsored benefit and isn’t available to self-employed individuals.

You decide how much to contribute to your FSA for the year, up to the annual limit. Your employer divides that amount by the number of pay periods in the year—typically 24 or 26—and deducts it from each paycheck before taxes.

FSA funds are generally use it or lose it: Money you don’t spend by the end of the year may be forfeited. Some plans offer a grace period or allow a limited amount of unused money to roll over into the next year. You also generally lose access to unused funds when you leave your job. That makes the amount you elect important: Contribute too much, and you could end up forfeiting some of it.

FSA enrollment generally doesn’t carry over automatically from year to year, so you’ll need to make a new election during your employer’s open enrollment period.

The Internal Revenue Service sets an annual contribution limit for health care FSAs. For 2026, you can contribute up to $3,400, up from $3,300 in 2025.

Some health care FSAs offer one of two ways to use funds remaining at the end of the year:

A health care FSA can offer a rollover or a grace period, but not both.

Many medical, dental, and vision expenses qualify for FSA reimbursement, including doctor visits, prescription medications, eye exams, dental procedures, and medical equipment. Some over-the-counter medications and health care products also qualify.

You may need to provide a receipt or other documentation showing that an expense qualifies for reimbursement.

An expense must be incurred during the plan year to qualify. For example, you can’t use this year’s FSA to pay for a root canal you had last year, even if the dentist doesn’t bill you until this year.

In addition to the health care flexible spending account, your employer may offer other types of FSAs that cover specific expenses:

A flexible spending account lets you set aside pretax money for qualified expenses, reducing the amount of your income subject to tax. Depending on the type of FSA, you can use the money for health care or dependent care expenses.

FSA funds generally must be used within certain deadlines, although some health care FSAs offer a grace period or allow a limited amount of unused money to roll over into the next year.