FSA Calculator
Flexible Spending Account: pre-tax dollars set aside for medical or dependent care expenses, with the use-it-or-lose-it rule.
About the FSA calculator
An FSA calculator estimates how much an employee saves by funneling out-of-pocket medical or dependent-care spending through a Flexible Spending Account, which uses pre-tax dollars and avoids federal income tax, state income tax in most states, and FICA at 7.65 percent. Typical net savings run 30 to 40 percent of the elected amount.
How it works
Tax saved = Election x (Federal % + State % + FICA %) Net cost = Election - Tax saved Forfeit = max(0, Election - Eligible spending - Carryover) True saving = Tax saved - Forfeit
- Election = annual contribution chosen during open enrollment, taken evenly per paycheck.
- Combined marginal rate = federal bracket (10 to 37%) + state tax (0 to 13.3%) + FICA (7.65%). Most W-2 earners land between 27% and 45%.
- Carryover = $660 (2026) if the employer offers it; mutually exclusive with the 2.5-month grace period.
Worked example
A single filer in California earning $90,000 in 2026 elects $2,500 in a Healthcare FSA to cover predictable dental, vision, and prescription costs. Their marginal rates are 22% federal, 9.3% California, and 7.65% FICA (38.95% combined). They spend $2,000 of eligible costs and lose the rest:
- Election: $2,500.
- Tax saved if fully spent: $2,500 x 0.3895 = $974.
- Net cost if fully spent: $2,500 - $974 = $1,526.
- Actual spending: $2,000; remaining $500 of which $500 carries over (under the $660 cap).
- Forfeit: $0 thanks to the carryover.
- True saving in year one: $974, with $500 of buying power deferred to next year.
2026 FSA limits and rules
| Plan | 2026 limit | Carryover / grace | Tax-advantaged? |
|---|---|---|---|
| Healthcare FSA | $3,300 per employee | $660 carryover OR 2.5-month grace (employer chooses one) | Federal, state (most), FICA |
| Dependent Care FSA | $5,000 household ($2,500 MFS) | 2.5-month grace only | Federal, state (most), FICA |
| Limited Purpose FSA (with HSA) | $3,300 | $660 carryover | Federal, state, FICA |
| Commuter (parking) | $325/month ($3,900/yr) | Rolls month to month | Federal, state, FICA |
| Commuter (transit) | $325/month ($3,900/yr) | Rolls month to month | Federal, state, FICA |
Common eligible expenses include copays and deductibles, prescription drugs, OTC medicines and menstrual products (CARES Act 2020), dental crowns, orthodontia, prescription glasses and contact lenses, LASIK, mental health therapy, fertility treatment, and chiropractic. Dependent Care FSA covers licensed daycare, before and after school programs, and summer day camp for children under 13.
Common pitfalls
- Over-electing. The use-it-or-lose-it rule means anything above the $660 carryover (Healthcare FSA) is forfeited. Anchor your election to last year's actual spending plus a small buffer, not wishful thinking.
- Confusing carryover with grace period. Employers can offer one but not both. Carryover is cleaner; grace period gives 2.5 extra months to spend but no rollover dollars after that.
- Mixing FSA with HSA. A full Healthcare FSA disqualifies you from contributing to an HSA. If you want both, ask if your employer offers a Limited Purpose FSA, which is HSA-compatible.
- Forgetting Dependent Care FSA limits. The $5,000 household limit has not been adjusted for inflation since 1986. Most families with two young children exceed it; the leftover spending may qualify for the federal Child and Dependent Care Tax Credit instead.
- Late substantiation. Most plans require receipts for any FSA debit card charge that does not auto-match. Unsubstantiated claims become taxable income.
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Frequently asked questions
What is the 2026 FSA contribution limit?
The IRS sets the 2026 Healthcare FSA limit at $3,300 per employee, plus an optional $660 carryover to the next plan year if the employer offers it. Dependent Care FSA stays at $5,000 per household ($2,500 if married filing separately), unchanged since 1986. Both elections lock for the plan year unless you have a qualifying life event.
How is an FSA different from an HSA?
An FSA is use-it-or-lose-it: anything beyond the $660 carryover (or 2.5 month grace period, whichever your employer offers) is forfeited at year end. An HSA balance rolls forever and invests like a 401(k), but requires an HDHP. HSA limits are higher in 2026 ($4,300 individual, $8,550 family) and contributions are triple tax advantaged. HSA wins if you are HDHP eligible.
Can I change my FSA election mid-year?
Only with a qualifying life event: marriage, divorce, birth or adoption, death of a spouse or dependent, change in employment status, dependent care provider change, or significant change in cost or coverage. The election change must be consistent with the event and filed within 30 to 60 days depending on the plan.
What expenses are FSA-eligible?
Healthcare FSA covers medical, dental, vision, prescription drugs, copays, OTC medications and menstrual products (since the 2020 CARES Act removed the prescription requirement), mental health, fertility treatment, prescription glasses and contacts, chiropractic, and acupuncture. Dependent Care FSA covers daycare under age 13, before and after school programs, summer day camp (not overnight), and adult day care for a tax dependent.
When an FSA makes the most sense
An FSA pays off best when you can predict your eligible spending with reasonable confidence, because the use-it-or-lose-it rule punishes over-funding. The clearest wins come from costs you already know are coming.
| Situation | FSA fit | Why |
|---|---|---|
| Planned orthodontia or LASIK | Strong | Large, certain cost you can fund pre-tax and spend in full |
| Regular prescriptions and copays | Strong | Predictable annual spend, easy to estimate the election |
| Daycare for a child under 13 | Strong (Dependent Care FSA) | Up to 5,000 dollars household pre-tax against known fees |
| Healthy year, few medical costs | Weak | Risk of forfeiting unspent dollars beyond the 660 dollar carryover |
| HDHP enrollee wanting to invest | Use an HSA instead | HSA rolls over and invests; a full FSA blocks HSA contributions |
The decision rule is simple: estimate your eligible spending for the year, then elect slightly below that figure so the tax saving is captured without risking forfeiture. If you are on a high-deductible health plan and eligible for an HSA, that account is usually the stronger choice because the balance never expires.
Sources
- IRS Revenue Procedure 2025-32 - 2026 inflation adjustments for FSA limits.
- IRS Publication 502 - Medical and Dental Expenses.
- IRS Publication 503 - Child and Dependent Care Expenses.
- CARES Act of 2020 - expansion of OTC eligibility without prescription.