FSA Limits refer to the maximum amount of money that an individual can contribute to a Flexible Spending Account (FSA) in a given tax year. FSAs are employer-sponsored benefit plans that allow employees to set aside pre-tax dollars to pay for qualified medical, dental, vision, or dependent care expenses. The Internal Revenue Service (IRS) sets annual contribution limits for different types of FSAs, which may change year to year due to inflation adjustments. Contributions reduce taxable income, but funds are generally subject to the “use-it-or-lose-it” rule unless the employer offers certain carryover or grace period options.
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Key Facts
- Types of FSAs: Healthcare FSA (for medical expenses) and Dependent Care FSA (for child or elder care expenses).
- Contribution Limits: The IRS sets annual maximum contribution amounts for each type of FSA.
- 2025 Limits (Estimated):
- Healthcare FSA: $3,200 per employee.
- Dependent Care FSA: $5,000 per household ($2,500 if married filing separately).
- Use-it-or-Lose-it Rule: Unused funds are typically forfeited, though some plans offer a $640 carryover or a 2.5-month grace period.
- Pre-Tax Benefit: Contributions are made pre-tax, reducing federal income and payroll taxes.
1. What is the FSA contribution limit for 2025?
The estimated IRS limit for Healthcare FSAs in 2025 is $3,200 per employee. For Dependent Care FSAs, the limit remains $5,000 per household or $2,500 if married filing separately.
2. Can I carry over unused FSA funds to the next year?
It depends on your employer's plan. Employers may offer a carryover option (up to $640 in 2025) or a grace period of 2.5 months to use leftover funds, but not both.
3. Are FSA contributions tax-deductible?
No, but FSA contributions are made pre-tax, meaning they reduce your taxable income and save on federal income and payroll taxes.
4. Can I change my FSA contribution amount mid-year?
Only if you experience a qualifying life event (for example, marriage, birth of a child, job change). Otherwise, your elections are locked in for the plan year.
5. What expenses are eligible under an FSA?
Eligible expenses include medical co-pays, prescriptions, dental work, eyeglasses, childcare (for Dependent Care FSAs), and many over-the-counter items, depending on the plan type.
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