With a health care FSA, you can use pre-tax dollars to pay for eligible medical, dental and vision care expenses, not covered by your health care plan. You get access to the full amount of your account on the first day of the plan. The amount you can set aside is limited by the Internal Revenue System (IRS) — the limit for a health care FSA in 2024 is $3,200. Health care FSA eligible expenses include: Medical expenses such as co-pays, co-insurance and deductibles Dental expenses such as exams, cleanings, X-rays and braces Vision expenses such as exams, contact lenses and supplies, eyeglasses and laser eye surgery Professional services such as physical therapy, chiropractor and acupuncture Prescription drugs Insulin Over-the-counter drugs that have been prescribed Over-the-counter health care items including bandages, pregnancy test kits, blood pressure monitors and more.

A limited-purpose FSA lets you set aside pre-tax earnings at the beginning of the plan year, to help pay for eligible dental and vision expenses only. The limit you can set aside for 2024 is $3,200. Because funds are only used for out-of-pocket dental and vision expenses, you can contribute to a limited-purpose FSAs while also contributing to a health savings account (HSA). By putting specific savings towards dental and vision expenses, you can reserve more money in your HSA for retirement. Typical eligible expenses include: Dental: Artificial teeth Braces Dental plan deductible, coinsurance and copayments Dental services like exams, cleanings, fillings and X-rays Mouth guards Orthodontia services Tooth removals Vision: Contact lenses and solutions Eyeglasses and frames LASIK eye surgery Vision exams Vision plan deductible, coinsurance and copayments

A Dependent Care FSA (DCFSA) is an account made up of pre-tax dollars and can be used to pay for eligible dependent care services including preschool, summer day camp, before or after school programs, and child or adult daycare for when you (or your spouse) work or are looking for work. The limit you can set aside for dependent care varies based on your filing status. If you’re married and filing separately, you can contribute $2,500. If you’re married and filing jointly or are head of household and single, the maximum contribution for 2024 is $5,000. DCFSA eligible expenses include: Dependent care for those under the age of 13 Before school care After school care Babysitters Daycare Preschool Summer camp In-home care for spouse or a relative who is physically or mentally incapable of self-care

What is a flexible spending account (FSA)?

If you have a health plan through an employer, a flexible spending account (FSA) is a tool offered by many employers as part of their overall benefits package. There are two different types of FSAs: One for health and medical expenses and one for dependent care/childcare expenses. Both FSAs were designed to help employees set aside money during the plan year to pay for out-of-pocket costs and catch a tax break in the process. Let’s go over the nuts and bolts of health care FSAs.

How do FSAs work?

An FSA is a tool that may help employees manage their health care budget. Here’s how a health and medical expense FSA works:

Employers set the maximum amount that you can contribute; however, it can’t exceed the IRS limit ($3,200 in 2024).¹
An FSA is not a savings account. If you leave your job, you can’t take your FSA with you.
If you don’t use the full amount you’ve elected to contribute by the end of the calendar year, you could lose, or forfeit, your FSA dollars.
As a way to protect employees from losing the money they’ve set aside, many companies have a policy allowing a carryover of up to $500 in unspent FSA money or grace period provision to still use prior year funds for new claims, up to 2 ½ months in to a new plan year. Any amount left in the account after that is generally no longer available to you.

How can I use the money in my health care FSA? What can I buy?

You can use your health care FSA for qualified medical expenses and services, as defined by the Internal Revenue Service. What are qualified medical expenses? The list is extensive, but some of the more common expenses and services include:

Deductibles
Copayments
Prescription medication
Vision care, including prescription eyeglasses
Thermometers
First-aid kits

Breast pumps and supplies
Hearing aids
Crutches
Mental health counseling
Addiction treatment
Over-the-counter medication (no toiletries, though — those are considered cosmetic)

Chiropractor care
Diabetic supplies (blood sugar monitors, test strips, diagnostic testing supplies)
Birth control
Contact lenses
Other health care related items/services

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Use your HSA or FSA funds to buy eligible products.

Types of FSAs

There are 3 types of FSAs. Each meets a different need and has its own unique qualities and benefits. The types include health care FSA, limited-purpose FSA and dependent care FSA. Some details about health care FSAs are available above. Read on to learn more about the differences between each type of FSA.

What are the benefits of a health care FSA?

Besides having an account just for health care and medical expenses, putting money into an FSA can offer tax advantages. The amount you contribute to your FSA is pre-taxed, meaning you save whatever percentage you would have paid in federal taxes if the money had not been deducted from your paycheck. Your employer saves on taxes, too — by avoiding a payroll tax.

Compare FSAs to other health accounts

FSAs are different from Health Savings Accounts (HSA) and Health Reimbursement Accounts (HRA). Comparing the different types of accounts may help you understand better how to use these accounts to your benefit.

Learn the difference between FSAs, HSAs and HRAs

How do I enroll in a health care FSA?

If your employer offers an FSA, at the beginning of a plan year, you decide how much money you want to allocate to your FSA. Think carefully about this estimate — you can’t change the amount unless your employment changes. Once you decide on an amount and set up your FSA, the amount is automatically deducted from your paycheck, then deposited into the FSA. You’ll either receive a debit card tied to the account or need to submit receipts to the FSA administrator to receive reimbursement.

It’s worth reading your employer’s plan if/when they offer an FSA — not all employers do — particularly if you’d be spending the money on out-of-pocket medical expenses regardless.