A Guide to Using a Flexible Spending Account (FSA)

Table of Contents:

What is a Flexible Spending Account?

what

A flexible spending account, or flexible spending arrangements, deducts pre-tax dollars from employees' paychecks to help them save for qualified healthcare expenses. FSA funds can be used to pay for things like copays, deductibles, medicines, and medical office visits. Also, you do not pay taxes on this money, meaning you will save an amount equal to the taxes you would have owed if you had not used an FSA. Additionally, there are three ways you can access your FSA: by using a debit card connected to the account, pay providers via the online portal, or submit receipts for reimbursement. This is why it is necessary to check with your employer or FSA provider to find out the right option(s) for you.

How to Use an FSA

Have a form of employment

How

Have

To open an FSA, your employer must offer it. Even so, you generally do not need to be enrolled in a health insurance plan to open one, and your employer may also contribute to your FSA. If your employer choses to contribute to your FSA, that is more money saved for healthcare expenses. Also note that to get reimbursed, you submit a claim through your employer with proof that the expense has not been covered by another plan.

Be mindful of the contribution limits: in 2026, you can contribute up to $3,400 per employer, and if you are married, your spouse can also contribute up to $3,400 through their employer.

Because FSAs are tied to employee benefits, the money is generally not portable if you leave your job. This is why before opening an FSA, consider your finances and healthcare needs to determine whether you can contribute enough to make the plan worthwhile.

Do not overspend

Dont

At the end of the year, you lose any money left over in your FSA. This is why you must plan ahead by not adding more money in your FSA than you think you will spend within a year.

Although you typically must use the money in an FSA within the plan year, your employer may offer additional options to move some of the leftover money:

An employer may provide a "grace period" of up to 2.5 extra months to allow you extra time to use the money.
An employer can allow you to roll over up to $680 per year, as of 2026, to use in the following year.

Your employer does not have to offer these options, but if they do, it can be either one of these options, but not both. These options may provide leeway for any lingering dollars that have yet to be spent, but ensure that you have a plan for every dollar you add to an FSA because it may be wasted money.

Verify eligible expenses

Verify

While FSAs have some restrictions on what you can use the funds on, there are many medical products and supplies that are eligible in an FSA:

You can spend FSA funds to pay deductibles and copayments, but not for insurance premiums.
You can spend FSA funds on prescription medications and over the counter medicines with a doctor's prescription. Reimbursements for insulin are allowed without a prescription.
FSAs may also be used to cover medical equipment costs like crutches and supplies like diagnostic devices and bandages.
You can use your FSA funds to pay for day-to-day items, such as sunscreen, band-aids, and menstrual care products.

For a more complete list of eligible expenses, review IRS Publication 502 or the FSA Store eligibility list.

Know the types of FSAs

know

A healthcare FSA is a standard FSA that can be used to help cover medical, dental, and vision expenses. For 2026, the contribution limit for this type of FSA is $3,400. Healthcare FSAs generally cannot be used with an HSA.

A limited purpose FSA (LP-FSA) can only be used to help cover qualified dental, vision, and preventative care expenses. For 2026, the contribution limit for an LP-FSA is $3,400. Limited purpose FSAs can typically be used with HSAs, unlike healthcare FSAs. Keep in mind that you might be able to maximize your HSA savings when you use funds from you LP-FSA instead of your HSA because an HSA promotes more tax-free growth and allows you to save the full annual maximum in your HSA.

A dependent care FSA (DC-FSA) is used to pay for qualified medical expenses for dependents. Dependents are children under the age of 13 and adults who are physically or mentally unable to take care of themselves. Eligible expenses could be child care, after-school programs, and senior day care. For 2026, the contribution limit for DC-FSA is $7,500 per household or $3,750 for married couples filing separately. Dependent care FSAs can be used with an HSA.

With a post-deductible FSA, you can only cover dental and vision expenses until you reach your maximum annual deductible. It is for this reason that this type of plan is a slightly less common type of FSA. However, once the deductible is met, you can use the funds from a post-deductible FSA to help pay for qualified medical costs. These accounts can also be used with an HSA.

FSA vs. HSA

Both an FSA and an HSA can be used to pay for qualified medical expenses while saving on taxes, but there are some key differences:

Money in an HSA can be invested or earn interest unlike FSA funds.
HSAs are owned by an individual instead of an employer.

HSAs are available to anyone who can meet the IRS's eligibility requirements, including having a high-deductible health plan.

Money in an HSA is portable and follows you even if you change employers or retire.

There is no use-it-or-lose-it with an HSA, so the full balance can be rolled over to the following plan year.

Check out our Why You Need A Health Savings Account (HSA) for more

How to Enroll

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You would normally open an FSA during your company's open enrollment period. When you are outside of the open enrollment period, changes can only be made mid-year if you have a qualifying life event. This is when you can enroll in or make changes to your FSA or any employee benefits. You can speak with your human resources (HR) department to learn more about FSAs.