FSA Contribution Limit 2026

2026 FSA Contribution Limits

Health FSA: $3,300 per employee (up from $3,200 in 2025). Limited Purpose FSA (HSA-compatible, dental/vision only): $3,300. Dependent Care FSA: $5,000 per household ($2,500 if married filing separately). Limits per employee — married couples each can have $3,300 health FSA = $6,600 combined. Pre-tax dollars taken from paycheck, available immediately for full year amount (unlike HSA which only has contributed-to-date).

The Use-or-Lose Rule (Modified)

Original FSA rule: forfeit unused balance at year-end. Modern variations: (1) Grace period: up to 2.5 months after year-end to spend (most common). (2) Carryover: up to $660 (2026 limit) can carry to next plan year. Employer chooses ONE option, not both. Plan year often calendar year but can be any 12-month period. Check plan documents — many employees forfeit $200-$2,000 every year due to use-or-lose ignorance.

Dependent Care FSA Math

$5,000 limit covers daycare, after-school, summer camp, in-home nanny for kids under 13 or qualifying disabled adults. Federal tax savings: $5,000 × marginal rate (32% bracket) = $1,600 saved per year. Plus FICA savings (7.65%) = $383 extra. State tax savings vary. Cannot stack Dependent Care FSA with Child and Dependent Care Tax Credit on same expenses — choose one. For most middle-to-high earners FSA wins.

FSA vs HSA — Why You'd Choose FSA

FSA wins when: (1) Need full year amount available immediately (FSA gives you $3,300 on Jan 1, HSA only what's contributed to date). (2) No HDHP available. (3) Highly predictable medical expenses (orthodontia, planned surgery). (4) Need dependent care benefit. HSA wins when: (1) Long-term wealth building (FSA is use-or-lose; HSA rolls forever). (2) Want investment growth. (3) Have HDHP. Many HDHP enrollees also have Limited-Purpose FSA for dental/vision.

Sources: IRS Rev. Proc. 2025-19, IRC §125, §129. Last updated: May 2026.