Definition
An employer account where you set aside pre-tax pay for medical or dependent care costs; the 2026 health FSA limit is $3,400.
What it means
A health flexible spending account lets employees pay for eligible medical, dental and vision costs with money taken from pay before income and FICA taxes. For 2026, the IRS limit on employee salary reductions to a health FSA is $3,400. Unlike an HSA, an FSA is generally use-it-or-lose-it: money not spent by the end of the plan year is forfeited, although an employer may offer either a short grace period or a limited carryover. The full yearly amount you elect is usually available from the first day of the plan year. FSAs are owned by the employer, so you generally lose the balance if you leave the job. A separate dependent care FSA covers child or adult care so you can work, with its own limit.
Example
Electing $2,400 for the year means $100 less taxable pay in each of 24 paychecks. In the 12% bracket with 7.65% FICA, that saves about $472 in taxes if all $2,400 is spent on eligible costs.
Illustrative numbers only. Your situation will differ.