Is There a Limit to FSA Contributions?

A Flexible Spending Account (FSA) is an employer-sponsored benefit that allows individuals to set aside pre-tax money for certain out-of-pocket healthcare or dependent care expenses. Contributions are deducted from gross pay before federal income taxes, Social Security, and Medicare taxes, reducing an individual’s taxable income. FSAs provide a tax-advantaged way to pay for eligible expenses, such as medical treatments, prescriptions, or childcare.

Understanding FSA Contribution Limits

Annual limits apply to Flexible Spending Account contributions, varying by FSA type. For a Health Flexible Spending Account (Health FSA), the Internal Revenue Service (IRS) sets an individual contribution limit. This limit applies per employee, allowing each employee to contribute up to the maximum, even if their spouse also participates in a Health FSA through their own employer.

For the 2025 plan year, the maximum individual contribution to a Health FSA is $3,200. If both spouses work for the same employer, the employer might implement a household limit for their specific plan, though the general IRS limit remains per individual.

Dependent Care Flexible Spending Accounts (DCFSAs) have a different contribution structure. The limit for a DCFSA is applied per household. For the 2025 plan year, the maximum amount for a DCFSA is $5,000 for a married couple filing jointly or a single parent.

A married couple filing separately has a household limit of $2,500 each. This household limit applies regardless of the number of dependents or whether both spouses contribute to the DCFSA.

Factors Influencing Contribution Limits

The Internal Revenue Service (IRS) establishes annual contribution limits for Flexible Spending Accounts. These limits are subject to annual adjustments and are typically announced late in the calendar year for the upcoming plan year.

While the IRS sets the maximum allowable contribution, employers can set lower limits for their specific FSA plans. This is less common for Health FSAs, but for Dependent Care FSAs, an employer might set a lower limit based on the plan’s design or to help ensure compliance with non-discrimination testing requirements.

Spousal participation influences how limits apply. If both spouses are eligible for a DCFSA through their employers, their combined contributions cannot exceed the household limit. For Health FSAs, if spouses work for different employers, each spouse can contribute up to the individual IRS limit through their separate plans.

Managing Your FSA Contributions

Contributions to a Flexible Spending Account are made through pre-tax payroll deductions. Employees elect their desired annual contribution, which is then divided by the number of pay periods for per-paycheck deductions. These deductions occur automatically once the election is made.

The opportunity to elect or change FSA contribution amounts typically occurs during the annual open enrollment period. This allows employees to make benefit selections for the upcoming plan year. Once an election is made, contributions generally cannot be changed mid-year.

Changes to FSA contributions during a plan year are only permitted if an individual experiences a qualifying life event. These events signify a significant change in family or employment status. Examples include marriage, divorce, the birth or adoption of a child, or a change in employment status.

If an individual contributes more than the IRS-mandated limit to an FSA, the excess amount may become taxable income. This typically requires the employer to correct payroll contributions, reclassifying the excess as taxable wages and making corresponding adjustments to tax withholdings.