What Are the FSA Contribution Limits for 2025

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A flexible spending account (FSA) is a tax-advantaged health account available through some employers. It lets you set aside pretax dollars to cover eligible healthcare expenses for yourself, your spouse, and qualifying dependents.

Each year, the IRS updates FSA contribution limits, and for 2025, those limits are increasing. This means you can put more money into your FSA to cover healthcare costs throughout the year.

What are the FSA limits for 2025?

The FSA contribution limit is increasing. In 2025, employees can contribute up to $3,300 to a health FSA. If you don't use all your FSA funds by the end of the plan year, you may be able to carry over $660 to 2026. This carryover option, if offered by your employer, allows you to roll over up to 20% of the annual FSA contribution limit each year.

If your employer doesn't offer a carryover option for unused FSA funds, they may provide a grace period instead. A grace period extends the time you have to use your remaining FSA balance. This timeframe is typically up to an additional 2.5 months after the plan year ends. Keep in mind that employers can offer either a carryover option or a grace period, but not both.

How did FSA limits change from 2024?

In 2024, FSA contributions were capped at $3,200 per person. If your employer allows it, you can carry over up to $640 to 2025.

For 2025, the FSA contribution limit is going up to $3,300. That means you can set aside an additional $100 out of your paycheck to pay for eligible healthcare expenses. If your spouse has a separate FSA with a different employer, they can also contribute up to the maximum. However, if you don't anticipate you'll need to spend that much on healthcare, you can contribute a lower amount to your FSA.

Take a look at the contribution limits for 2024 and 2025 and the year-over-year changes.

How do FSA limits work?

While FSAs are employer-sponsored accounts, the IRS sets the annual contribution limit. These limits cap how much an employee can contribute to their FSA on a pretax basis each year. For example, in October 2024, the IRS released tax adjustments for 2025, including a new maximum contribution of $3,300 for health FSAs.

FSAs are typically part of cafeteria plans. These are benefit programs that allow employees to choose from a variety of pretax benefits, such as FSAs, health savings accounts (HSAs), group-term life insurance coverage, and retirement contributions. These plans provide tax savings by reducing taxable income for covered expenses. By setting a cap on contributions, the IRS limits the pretax amount employees can use for eligible expenses each year.

How can you maximize your FSA contributions?

An FSA is a health benefit available only to employees of companies that offer this type of account. If you have an FSA, here are some key points to help you make the most of it.

• Payroll deductions: FSAs are funded through payroll deductions, with the amount determined during your benefits enrollment period. Some employers may contribute money to your FSA, but it's not required.

• Tax savings: Contributions reduce your taxable income, so you won't pay taxes on FSA dollars used for eligible expenses. For instance, if you earn $100,000 annually and contribute the 2025 maximum of $3,300 for eligible expenses, you'll only be taxed on $96,700 of your earnings.

• Deadlines: Your full FSA balance is available at the start of the plan year, but unused funds may be forfeited if not used by the deadline. Check with your HR department for the specific deadline, and ask if a grace period or carryover option is available.

What happens if you contribute too much to your FSA?

FSAs have a "use it or lose it" feature. This means that if you don't use the funds before your employer's deadline, you risk losing them. Any unused funds go back to your employer. For example, if you contribute $3,000 to your FSA for 2025 but only use $2,000 before the deadline, you may forfeit the remaining amount unless your employer offers a grace period or carryover option.

How can you use your FSA

FSA funds can cover a range of out-of-pocket healthcare expenses, such as deductibles, coinsurance, and copayments. You can also use your dollars to pay for everyday items, such as contact lenses and lip balm, if they meet certain requirements. Keep in mind that the expenses must be medically necessary and not be reimbursed by any other health plan or benefit.

Here are a few other FSA-eligible items to consider spending your funds on before they expire. You may be aware of some, but others might surprise you.

• Braces

• Dental fillings

• Dentures

• Root canals

• Menstrual products

• MRIs

• Prenatal vitamins

• Prescription eyeglasses

• Prescription sunglasses

• Sunscreen

• Theragun

It's a good idea to check with your FSA provider to confirm the eligibility of various products and services first to ensure you can receive reimbursement. You may need to submit a letter of medical necessity for certain items.

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