How Much Should I Put in My FSA Per Paycheck?

Flexible Spending Accounts (FSAs) allow you to manage out-of-pocket expenses with pre-tax dollars, reducing taxable income. Understanding how to determine appropriate contributions can lead to significant financial benefits. This guide helps estimate and calculate your FSA contributions to maximize savings.

Understanding Flexible Spending Accounts (FSAs)

A Flexible Spending Account (FSA) is an employer-sponsored benefit allowing employees to set aside pre-tax money from their paycheck for eligible healthcare or dependent care expenses. These funds are automatically deducted from gross pay, lowering income subject to federal, Social Security, and Medicare taxes.

FSAs come in two primary types: Health Care FSAs (HCFSA) and Dependent Care FSAs (DCFSA). An HCFSA covers eligible medical, dental, and vision expenses like deductibles, co-payments, and prescription drugs. A DCFSA is for dependent care services, such as childcare for dependents under 13, or care for a spouse or relative unable to self-care who lives in the employee’s home. These services enable the employee, and their spouse, to work or seek employment.

Estimating Your Annual FSA Needs

Accurately estimating annual FSA needs avoids forfeiting unused funds. Identify all potential eligible expenses for both Health Care and Dependent Care FSAs. HCFSA expenses include doctor visits, prescription medications, dental work, vision care, and over-the-counter items. DCFSAs cover services like daycare, preschool, before- and after-school programs, summer day camps, and in-home care. Consult your FSA administrator or IRS guidance for a definitive list of eligible expenses.

To estimate your annual amount, review past spending on healthcare and dependent care. This includes examining insurance Explanation of Benefits (EOBs), past receipts for medical services, dental procedures, vision care, and childcare records. Beyond historical data, anticipate future needs such as planned medical procedures, dental work, or changes in dependent care arrangements. Consider both recurring expenses, like ongoing prescriptions or regular daycare costs, and one-time expenses, such as a planned surgery or new eyeglasses.

The “use-it-or-lose-it” rule means funds not spent by year-end are forfeited. However, employers often offer exceptions. Some plans provide a grace period (typically up to 2.5 months) to incur expenses. Others permit a limited carryover to the next plan year; for example, up to $660 of unused HCFSA funds for 2025. Employers can offer either a grace period or a carryover, but not both.

Understanding the annual contribution limits is also essential. For Health Care FSAs, the maximum employee contribution for 2025 is $3,300. If married, both spouses can contribute up to this limit through their respective employers. For Dependent Care FSAs, the maximum household contribution is $5,000 per year, or $2,500 for married individuals filing separately. These limits are set by the IRS and are subject to change annually.

Calculating Your Per-Paycheck Contribution

Once your total annual FSA contribution is determined, calculate the per-paycheck deduction by dividing your elected annual amount by your employer’s number of pay periods. For example, a $2,600 annual election with bi-weekly pay (26 periods) results in a $100 deduction per paycheck.

A key difference exists in fund availability between Health Care FSAs and Dependent Care FSAs. With an HCFSA, the full annual elected amount is typically available on the first day of the plan year, regardless of contributions. For example, a $3,000 election allows reimbursement for a $2,000 medical expense early in the year. Conversely, DCFSA funds are only available as they are contributed; reimbursement is limited to the amount deducted from paychecks. The employer then places these contributions into your FSA account, making them available for eligible expenses according to the rules of your specific FSA plan.

Adjusting Your FSA Contribution

Generally, once you make your Flexible Spending Account (FSA) election during open enrollment, it is irrevocable for the plan year, meaning you cannot typically change your contribution until the next enrollment period. The IRS establishes specific circumstances, known as “qualifying life events,” that may permit a change to your FSA election mid-year.

These qualifying life events commonly include changes in marital status (e.g., marriage, divorce, death of a spouse) or a change in the number of your tax dependents (e.g., birth or adoption of a child). Changes in employment status for you, your spouse, or your dependent that affect benefits eligibility, or significant changes in dependent care costs or providers, are also often considered qualifying events. If you experience a qualifying life event, notify your employer’s HR or benefits administrator within a specific timeframe, often 30 days. You will likely need to provide documentation, and the requested change must be consistent with the event. For example, a new child may allow you to increase HCFSA or DCFSA contributions. Not all employers permit mid-year changes for all FSA types under every qualifying event, so check your plan’s Summary Plan Description (SPD) or with your benefits administrator.