Glossary
Flexible spending account
Also called FSA
Definition
A flexible spending account (FSA) lets employees set aside pre-tax pay for eligible health or dependent care costs, saving income tax and FICA. 2026 limits are $3,4002026 · IRS Rev. Proc. 2025-32 for health FSAs and $7,5002026 · IRS for dependent care. Unused health money may be forfeited.
How flexible spending account works
Elections are made at open enrollment and are generally fixed for the year. Employers may offer a grace period or a limited carryover.
Dependent care FSA benefits interact with the child and dependent care credit.
Why it matters to a firm
Choosing the election amount, and between an FSA and the credit, is a recurring planning question.
| 2026 figure | Source |
|---|---|
| Health FSA contribution limit: $3,400 | IRS Rev. Proc. 2025-32 |
| Dependent care FSA limit (per household): $7,500 | IRS, as stated in the calculator |
Calculators that use flexible spending account
Questions about flexible spending account
What if I don't spend it?
Health FSA money may be forfeited unless the plan offers a grace period or carryover.
Can I have an FSA and an HSA?
Generally only a limited-purpose FSA.
Do FSAs reduce FICA?
Yes.
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Related terms: FICA · Health savings account
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