FSA Contribution Limits: Household Rules, Elections, and Unused Funds

For 2026, the Health FSA contribution limits are $3,400 per employee, and the Dependent Care FSA cap jumped to $7,500 for joint filers under a law signed in July 2025. Married couples filing separately are capped at $3,750 each on the dependent care side. If your Health FSA plan allows a carryover, up to $680 of unused 2026 funds can roll into 2027.¹²

The Health FSA number is $100 higher than the 2025 limit of $3,300. The Dependent Care FSA figure is the bigger story: it had been stuck at $5,000 for decades, and the legislation raising it to $7,500 takes effect for tax years beginning after December 31, 2025.²

How the Household Rules Work

The Health FSA cap is per employee, not per household. If you and your spouse each have access to a Health FSA at work, you can each contribute up to $3,400, for a combined $6,800.³

The Dependent Care FSA works the opposite way. The $7,500 ceiling is a per-household number for joint filers. You can split it between two employer plans, but the sum of both accounts cannot exceed $7,500.

What Maxing Out Is Actually Worth

FSA money comes out of your paycheck before federal income tax, Social Security tax (6.2%), and Medicare tax (1.45%) are calculated.⁴ That is why the caps matter in dollar terms.

A worker in the 22% federal bracket who contributes $2,400 to a Health FSA saves $528 in federal income tax, $148.80 in Social Security tax, and $34.80 in Medicare tax. That is $711.60 on spending they were going to do anyway. Most states also exclude FSA contributions from taxable income, which adds to the total. Overall savings typically run 25% to 35% of the amount contributed.

The Dependent Care FSA increase is worth roughly $625 to $875 in extra annual savings on the additional $2,500 now shielded from tax, depending on your bracket.

One trade-off: because FSA deductions reduce your reported earnings to the Social Security Administration, they can slightly lower your future Social Security benefit. Benefits are calculated on your highest 35 years of indexed earnings, so the effect of a modest yearly contribution is negligible for most people.⁵

Choosing a Number Under the Cap

The cap tells you the ceiling. It does not tell you what to contribute. Overshooting means forfeited money at year-end; undershooting means unused tax savings. Thirty minutes with last year’s records usually gets you close.

Pull the last 12 months of insurance Explanation of Benefits statements and pharmacy receipts. Add up copays, prescriptions, dental work, eyeglasses or contacts, and lab or specialist fees. That is your baseline. Then add known upcoming costs: orthodontia, a planned procedure, a new pair of glasses. Compare the total to the $3,400 cap.

Over-the-counter medications count without a prescription, a change made permanent by the CARES Act in 2020.⁶ Pain relievers, allergy medicine, cold medicine, menstrual care products, sunscreen, and first-aid supplies are all eligible. If you buy those regularly, they add up faster than expected.

The IRS defines eligible medical expenses as costs for diagnosis, treatment, or prevention of disease, plus equipment and supplies needed for those purposes.⁷ Hearing aids, blood sugar test kits, and crutches qualify. Gym memberships and nutritional supplements generally do not, unless a doctor prescribes them to treat a specific condition.

Health and Dependent Care Limits Don’t Overlap

The two FSAs share a name but sit under different sections of the tax code and have separate caps. Contributing to a Health FSA does not reduce your Dependent Care FSA room, or vice versa. You can fund both in the same plan year.

A Health FSA covers medical, dental, and vision expenses for you, your spouse, and your tax dependents. The $3,400 cap applies per employee regardless of family size.¹

A Dependent Care FSA covers work-related care so you (and your spouse, if married) can work or look for work. Eligible dependents include children under age 13, a disabled spouse, and adult dependents who cannot care for themselves. Qualifying expenses include day care, preschool, before- and after-school programs, summer day camp, and adult day care for an elderly parent living with you.⁸ Overnight camps and private school tuition do not qualify. Full-time child care commonly runs $9,000 to $20,000 a year, so even the raised $7,500 cap will not cover a full bill for most families, but it closes a meaningful part of the taxable gap.²

If You Have an HSA

A general-purpose Health FSA disqualifies you from making HSA contributions, because the IRS treats it as “other health coverage” that conflicts with HSA eligibility.⁹ This applies even when the FSA is your spouse’s, through their own employer.

The workaround is a Limited-Purpose FSA, which restricts reimbursements to dental and vision expenses. Because it does not touch general medical costs, it does not conflict with HSA eligibility.¹⁰ The Limited-Purpose FSA follows the same $3,400 cap and $680 carryover maximum as a regular Health FSA. Some employers also offer a post-deductible FSA, which holds off on reimbursing medical expenses until you have met your high-deductible plan’s minimum deductible.

Locking In Your Election

You choose your contribution during your employer’s annual open enrollment, typically in the last few months of the calendar year for a January 1 plan start. Once the plan year begins, the election is generally fixed.

The exception is a qualifying life event: marriage, a new child, adoption, loss of other coverage, or an employment change that affects your benefits eligibility. You usually have 30 days from the event to adjust your election.¹¹ Outside those windows, the number you picked is the number you have.

What Happens to Money You Don’t Spend

Unspent FSA funds generally disappear at plan-year end under the use-it-or-lose-it rule.¹² Your employer may offer one of two softening options, but not both:

Carryover of up to $680 in unused Health FSA funds into the next plan year. You typically must re-enroll to keep it.¹
A grace period of an extra two and a half months after the plan year to incur new expenses against the old year’s balance.¹³

Neither is required. Check your plan documents. If you leave the job with an unused balance, that balance is forfeited unless you elect COBRA continuation for the FSA and keep contributing on an after-tax basis.¹⁴

How Employer Contributions Fit

Some employers put their own money into your Health FSA. An employer can add up to $500 regardless of whether you contribute. Above $500, employer contributions must be matched dollar-for-dollar by your own. So a $1,000 employer contribution requires at least $500 from you.

Whether the employer’s contribution eats into your $3,400 room depends on plan structure. If it is set up as an employer flex credit inside a cafeteria plan, it counts toward the cap. Many employers structure their contributions to sit outside the employee limit. Ask your benefits administrator before you decide on your own election, because the answer changes how much pre-tax room you actually have.

1
FSAFEDS. New 2026 Maximum Limit Updates
2
Office of the Law Revision Counsel. 26 USC 129 – Dependent Care Assistance Programs
3
HealthCare.gov. Using a Flexible Spending Account
4
Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans
5
Social Security Administration. Social Security Benefit Amounts
6
FSAFEDS. All Over-the-Counter (OTC) Medicines or Drugs
7
Internal Revenue Service. Frequently Asked Questions About Medical Expenses Related to Nutrition, Wellness and General Health
8
FSAFEDS. Eligible Dependent Care FSA (DCFSA) Expenses
9
Internal Revenue Service. Health Savings Accounts and Other Tax-Favored Health Plans
10
FSAFEDS. Limited Expense Health Care FSA
11
FSAFEDS. FAQs – What Is a Qualifying Life Event
12
FSAFEDS. FAQs – What Is the Use or Lose Rule
13
Internal Revenue Service. Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans
14
Internal Revenue Service. IRS Notice 2013-71 – Modification of Use-or-Lose Rule for Health Flexible Spending Arrangements