What Are the FSA Contribution Limits for 2025?

A Flexible Spending Account (FSA) is a benefit plan some employers provide that allows you to set aside money for certain expenses before taxes are taken out of your paycheck. This process reduces your taxable income, which can lower the amount of federal, Social Security, and Medicare tax you owe. The funds are deducted from your pay in regular increments and placed into an account you can access throughout your plan year.

2025 FSA Contribution Limits

For the 2025 plan year, the Internal Revenue Service (IRS) has set the maximum employee contribution for Health Flexible Spending Arrangements at $3,300. This represents a $100 increase from the 2024 limit. This limitation applies to Health FSAs and also extends to Limited-Purpose FSAs (LPFSAs), which are restricted to dental and vision expenses. This amount is the federal ceiling, but an employer has the discretion to establish a lower contribution limit. With a Health FSA, your entire annual election is available on the first day of the plan year, regardless of how much you have contributed.

The contribution structure for a Dependent Care FSA operates under a different set of rules. For 2025, the maximum contribution remains unchanged at $5,000 per household for the year. This limit is also set at $2,500 for individuals who are married but file separate tax returns. These figures are determined by household and tax filing status, not per individual employee. Unlike a Health FSA, funds in a Dependent Care FSA are only available for reimbursement as they are deposited into the account, and you cannot be reimbursed for more than the account’s current balance.

Understanding Eligible Expenses

The funds in a Health FSA can be used for many medical costs that are not covered by your health insurance plan. Common examples include deductibles, copayments for doctor visits, and prescription medications. Many over-the-counter drugs and health products also qualify. Dental and vision care, such as cleanings, fillings, eyeglasses, and contact lenses, also qualify for reimbursement.

A Dependent Care FSA is designed to help pay for the care of qualifying dependents while you are at work. Eligible expenses include payments for daycare centers, preschool tuition, and before- or after-school programs. The cost of summer day camps for children under the age of 13 is also a frequent use for these funds. The services must be necessary to enable you (and your spouse, if applicable) to work or look for work.

Managing Unused Funds

A defining characteristic of FSAs is the “use-it-or-lose-it” rule. This provision means that any money left in your account at the end of the plan year is forfeited back to your employer. This rule requires careful planning to ensure you elect an amount that you will realistically spend on qualified expenses within the plan year.

To mitigate the impact of this rule, employers may offer one of two options, but not both. The first is a carryover provision, which allows you to move a portion of your unused funds into the next plan year. For plans ending in 2025 and rolling into 2026, the IRS permits a maximum carryover of $660.

The second option an employer might provide is a grace period. This gives you an additional 2.5 months after the end of your plan year to incur new expenses and spend down your remaining FSA balance. For example, if your plan year ends on December 31, a grace period would extend your time to use the funds until March 15 of the following year. It is important to check with your employer’s plan documents to see if they offer a carryover, a grace period, or neither.