How Much Should I Contribute to My FSA: Limits and Carryover

For the 2026 plan year, you can contribute up to $3,400 to a health Flexible Spending Account, but the right question is not how much the IRS allows — it’s how much you’ll actually spend on medical, dental, and vision care that your insurance won’t cover.¹ Contribute too little and you leave tax savings on the table. Contribute too much and the use-it-or-lose-it rule claws it back. So the goal is a number that tracks your real expected costs, with a small cushion only if your plan lets you carry money forward.

Start With Last Year’s Out-of-Pocket Spending

The most reliable baseline is what you already spent. Pull your Explanation of Benefits statements from the past twelve months. They show what insurance paid and what you owed, which is exactly the figure an FSA is meant to cover.

Add up these recurring categories:

Prescription co-pays, which commonly run $10 to $50 per fill depending on the drug tier
Dental cleanings, fillings, and orthodontic work your dental plan doesn’t fully cover
Annual eye exams, prescription glasses, and contact lenses
Specialist co-pays, often $40 to $100 per visit for dermatology, allergy, physical therapy, and similar
Over-the-counter medicines, first-aid supplies, and diagnostic devices like blood pressure monitors

If last year was fairly typical of your health, that total is a solid starting point for next year’s election.

Add Known Upcoming Care

On top of routine spending, build in anything you already know is coming. A recommended surgery, dental crowns, LASIK, orthodontics for a child, a planned pregnancy — get a cost estimate and add the out-of-pocket portion. Some items need a Letter of Medical Necessity from your doctor before an FSA will reimburse them, particularly alternative treatments and specialized equipment, so confirm eligibility before you count on the money.²

How Much Cushion to Add

How far you pad the number depends entirely on what your employer’s plan allows if you don’t spend it all. If your plan offers a carryover, electing 5% to 10% above your baseline gives you room for unexpected co-pays with little forfeiture risk, because small leftovers roll forward. If your plan offers only a grace period, or neither, stay close to your baseline or slightly under. Forfeiting money erases the tax advantage you were trying to capture in the first place.

What the Tax Savings Actually Look Like

FSA contributions come out of your paycheck before federal income tax, the 6.2% Social Security tax, and the 1.45% Medicare tax are calculated. The U.S. Office of Personnel Management estimates most participants save about 30% in federal taxes on money run through an FSA.³ At a $3,400 election in the 22% federal bracket, that’s roughly $1,000 or more in combined savings, before any state tax benefit. The savings are real, but only on dollars you actually spend on qualifying care.

Make Sure Your Estimate Reflects What Actually Qualifies

An FSA covers a wide range of medical, dental, and vision costs that insurance doesn’t fully pay: doctor visit co-pays, hospital and lab coinsurance, deductibles, prescriptions, dental procedures, eye exams, glasses, and contacts.⁴ Since the CARES Act took effect in 2020, over-the-counter medicines like allergy pills, pain relievers, and cold medicine qualify without a prescription.⁵ Bandages, thermometers, and blood sugar test kits also count.

Cosmetic procedures, gym memberships, and general wellness products not treating a specific condition don’t qualify. If a chunk of your anticipated spending falls in the non-qualifying bucket, leave it out of your election math.

The Limits That Cap Your Election

The 2026 health FSA contribution limit is $3,400, up $100 from 2025.¹ The cap is indexed to inflation under 26 U.S.C. 125 and rounded down to the nearest $50.⁶

If you and your spouse each have access to an FSA through separate employers, each of you can contribute up to the full $3,400. There is no combined household limit for health FSAs. Any amount your employer kicks in doesn’t count against the $3,400 cap, which applies specifically to salary reduction contributions from your own paycheck.

The Use-It-or-Lose-It Rule

Any money left in your health FSA at the end of the plan year is forfeited under federal rules.⁷ You can’t cash it out, roll it into another benefit, or request a refund. Elect $3,400, spend $2,400, and the remaining $1,000 is gone. This is the single biggest reason to size your election carefully.

Most plans run on a calendar year, so the deadline to incur expenses is December 31 unless your employer offers one of the relief provisions below. Don’t confuse that with the run-out period, which is a separate window — commonly 90 days after year-end — for submitting paperwork on expenses you already incurred before the deadline. It doesn’t give you more time to spend.

Carryover vs. Grace Period: Check Before You Decide

Employers may adopt one of two IRS-authorized provisions to soften forfeiture, but they aren’t required to offer either, and they can’t offer both.⁸ Which one applies — if any — changes how aggressively you can contribute.

Carryover: up to $680 of unused funds moves into the next plan year for 2026, up from $660 in 2025. Carried funds don’t count against the new year’s $3,400 cap.¹
Grace period: an extra two and a half months after the plan year ends to spend what’s left on new eligible expenses. For a calendar-year plan, that pushes the deadline to March 15, with no dollar cap on what you spend in those months beyond your remaining balance.

Carryover rewards consistent overestimation with a small built-in buffer every year. The grace period rewards a last-minute spending push. Confirm which your employer offers during open enrollment, then set your election accordingly.

If Your Situation Changes During the Year

Your election is generally locked in until the next open enrollment. The IRS allows mid-year changes only after a qualifying life event, including marriage, divorce, or legal separation; the birth or adoption of a child; the death of a spouse or dependent; a change in employment status for you, your spouse, or a dependent that affects health insurance eligibility; or a change in a dependent’s eligibility, such as a child aging out.⁹

The change must match the event. Having a baby justifies an increase, not a decrease. Some plans won’t accept increases after September 30 because too few pay periods remain to collect the extra contributions.⁹ FSA enrollment also doesn’t carry forward automatically; you have to re-elect each year.³

If You Have an HSA, a Standard FSA Isn’t an Option

One boundary worth flagging before you set a number. If you’re enrolled in a high-deductible health plan and contribute to a Health Savings Account, you generally cannot also have a standard health FSA. The IRS treats a general-purpose FSA as disqualifying coverage for HSA purposes.¹⁰

A limited-purpose FSA is the exception. It covers only dental and vision expenses and is designed to run alongside an HSA, so you can use it for cleanings, orthodontics, eye exams, glasses, and contacts without losing HSA eligibility.¹⁰ If you’re moving to an HDHP with an HSA, spend any existing general-purpose FSA balance down to zero before the new year, because a grace period extending into the new year can block HSA contributions during those months.

1
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
2
FSAFEDS. Eligible Health Care FSA Expenses
3
U.S. Office of Personnel Management. Flexible Spending Accounts
4
Internal Revenue Service. Publication 502 (2025), Medical and Dental Expenses
5
FSAFEDS. FAQs – OTC Medicines and CARES Act
6
Office of the Law Revision Counsel. 26 USC 125 – Cafeteria Plans
7
Internal Revenue Service. Modification of Use-or-Lose Rule for Health Flexible Spending Arrangements, Notice 2013-71
8
Internal Revenue Service. IRS: Eligible Employees Can Use Tax-Free Dollars for Medical Expenses
9
FSAFEDS. What Is a Qualifying Life Event?
10
Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans