What Is a Flex Spending Account?

Short answer

A Flex Spending Account (FSA), or healthcare FSA, is an employer-sponsored benefit that allows you to set aside pre-tax dollars to pay for eligible medical expenses. Your employer or you contributes money to the account through payroll deductions, and you can use it to pay for doctor visits, prescriptions, dental work, vision care, and other qualified healthcare costs.

Unlike a Health Savings Account (HSA), which is tied to a high-deductible health plan, an FSA is available to most employees regardless of their health insurance type. The main trade-off: money you don't spend by the end of the year is typically forfeited, though some plans allow a small carryover. The benefit is immediate tax savings on every dollar you contribute.

Definition and Who Is Eligible for the Account

A health care Flexible Spending Account (FSA) is an employer-sponsored benefit plan that lets you set aside pre-tax dollars for medical expenses. Health FSAs are "employer-established benefit plans," in the IRS's own words, and you decide how much to contribute through payroll deductions each year. The money reduces your gross income, so you pay less in federal income tax and payroll taxes on that amount.

To be eligible for an FSA, you must be an employee of a company that offers the plan. Self-employed individuals and freelancers cannot participate in a health care FSA through their own business. If your employer offers an FSA, you can typically enroll during your company's annual open enrollment period or within 30 days of a qualifying life event like marriage or the birth of a child.

Unlike an HSA, which requires you to be enrolled in a high-deductible health plan, an FSA is available regardless of your health insurance type. You can have an FSA whether you're on a PPO, HMO, or any other insurance plan. There are also dependent care FSAs and limited-purpose FSAs, but those cover child or elder care and vision/dental expenses respectively, not general medical costs.

How Money Goes In

You fund an FSA through pre-tax payroll deductions. Each year during open enrollment, you decide how much to contribute, and that amount is divided equally across your paychecks and set aside in the account. Your employer may add its own contribution on top, but you can't add money to the account outside of payroll.

Contribution Limits

The IRS sets an annual maximum contribution limit for health care FSAs. For 2026, "the dollar limitation for voluntary employee salary reductions for contributions to health flexible spending arrangements increases to $3,400," up from $3,300 in 2025. Your employer may set a lower limit, so check your plan documents. You decide your contribution amount based on what you expect to spend on eligible medical expenses in the coming year.

How to Elect an FSA

You enroll in an FSA through your employer's benefits platform during open enrollment, which usually happens once a year in the fall or winter for coverage starting the next calendar year. You'll estimate how much you'll spend on eligible medical expenses over the year and elect that amount. Once the plan year begins, that's the amount that will be deducted from your paychecks, divided equally across all pay periods.

How Money Comes Out: Card, Reimbursement, Who Files

HealthCare.gov calls an FSA "an arrangement through your employer that lets you pay for many out-of-pocket medical expenses with tax-free dollars." In practice, you can spend that money two ways. Use an FSA debit card at the point of purchase, or pay out of pocket and request reimbursement. Some employers offer both methods, while others may limit you to one.

Using an FSA Card

Many FSAs come with a debit card issued by your plan administrator. You can swipe this card at the pharmacy, doctor's office, optometrist, or dentist to pay for eligible expenses directly. The card automatically deducts the amount from your FSA balance. Not all merchants accept FSA cards, especially online retailers, so you may still need to pay out of pocket and request reimbursement for some purchases.

Reimbursement Process

If you pay for an eligible expense with your personal funds or a regular credit card, you can request reimbursement from your FSA. You typically submit a claim form or request through your plan administrator's website or app, along with a receipt showing the expense. The administrator reviews the claim and sends you a reimbursement by direct deposit or check. The timeline varies by administrator but usually takes 5 to 10 business days.

What Counts as Eligible

FSA funds can pay for any qualified medical expense as defined by the IRS under Publication 502. This includes doctor visits, copays, prescriptions, insulin, dental work, eyeglasses, hearing aids, physical therapy, and many other treatments and supplies. The plan document and your specific plan administrator may exclude certain items, so always check your summary plan description before assuming something is covered. Cosmetic procedures are not reimbursable. Gym memberships and general wellness supplements can be reimbursed with a letter of medical necessity when a clinician ties them to a diagnosed condition.

Letter of Medical Necessity

Some items, like certain supplements, devices, or treatments, are reimbursable with a letter of medical necessity from a licensed clinician, even when they don't qualify outright under Publication 502. Burst issues that letter and files the reimbursement claim with your FSA, HSA or HRA administrator, and the administrator pays you out of your account. The letter has to be dated on or before the purchase it covers, so request it before you buy.

Year End and Job Change

One key feature of an FSA is the use-it-or-lose-it rule. Unlike an HSA, which lets you carry money over indefinitely, an FSA has a deadline. Any money you don't spend in your FSA by the end of the plan year is forfeited. This is why choosing your FSA contribution amount wisely is important.

The Use-It-or-Lose-It Rule

Money left in your FSA at the end of the plan year is lost. However, the IRS allows employers to offer a grace period or a limited carryover. For 2026, "the maximum carryover amount is $680, an increase of $20 from tax years beginning in 2025." Other plans offer a grace period of up to 2.5 months into the next year to spend your remaining balance. Check your plan documents to see which option your employer offers, or if neither applies to your plan.

What Happens When You Change Jobs

If you leave your job or change employers, your FSA terminates immediately, and you forfeit any unused balance. You cannot transfer FSA funds to a new employer's plan or to an HSA, and you cannot withdraw the money for personal use. The best way to avoid losing money is to estimate conservatively when choosing your FSA contribution amount. Once you leave your employer, you may be eligible to enroll in a new FSA through your new employer during the next open enrollment period.

Run-Out Period

Some plans offer a run-out period after the plan year ends, which gives you extra time to submit claims for expenses you incurred during the plan year. This is usually 30 to 90 days after the year ends. You can still request reimbursement for expenses from the plan year during the run-out period, as long as the expense was incurred before the plan year ended.

FSA, HSA, and HRA Comparison

FSAs, HSAs, and HRAs are three different tax-advantaged accounts for medical expenses. While they share some similarities, they have important differences in eligibility, funding, and rules.

Where Burst fits

A few things in this world are reimbursable only with a letter of medical necessity, such as a gym membership, massage therapy or a piece of fitness or recovery equipment tied to a diagnosed condition. For those, Burst writes the letter and files the claim for $35, and refunds it if no letter is issued or the claim is denied. See how a letter works.

Frequently asked questions

What are things you can buy with a flexible spending account?

Doctor visits, copays, prescriptions, dental and vision care, physical therapy, and most other IRS-qualified medical expenses are flexible spending account purchases. See the full eligible items list.

What counts as an HSA expenditure?

HSA expenditures are the same category of IRS-qualified medical expenses as an FSA: doctor visits, prescriptions, dental, vision, and similar costs. The difference is timing. HSA balances carry over with no deadline, so you can spend the money on a qualified expense years after you contributed it.

What is the difference between an FSA and an HSA?

An FSA is available to employees of any company that offers it, regardless of their health insurance type. An HSA requires enrollment in a high-deductible health plan. FSA money is forfeited at year-end if not spent, while HSA money rolls over indefinitely. If you leave your job, you lose your FSA balance but keep your HSA. Read the full comparison.

Can I use my FSA at any doctor or pharmacy?

Yes, you can use your FSA at any healthcare provider or pharmacy that accepts FSA payments. If you use an FSA debit card, it works like a regular debit card. If you pay out of pocket, you can request reimbursement from any eligible medical expense, regardless of where you got the service.

What happens to my FSA money if I don't spend it?

Under the use-it-or-lose-it rule, any money left in your FSA at the end of the plan year is forfeited. However, your employer may offer a grace period (up to 2.5 months into the next year to spend remaining funds) or allow you to carry over up to $680 to the next year (up from $660 in 2025). Check your plan documents to see which option applies.

Can I contribute to both an FSA and an HSA?

Not at the same time in the same year. If you have a high-deductible health plan, you can contribute to an HSA. If your employer offers an FSA through a traditional plan, you can contribute to that instead. Some employers offer a limited-purpose FSA paired with an HSA for dental and vision expenses only, which is allowed.

What happens to my FSA when I leave my job?

Your FSA terminates immediately when you leave your job, and any unused balance is forfeited. You cannot carry the money to a new job or transfer it to another account. When you start a new job, you can enroll in that employer's FSA during the next open enrollment period.

Can I get reimbursed for something before I buy it?

No. The Letter of Medical Necessity has to be dated on or before the purchase it covers. Request the letter before you buy so you have proof of medical necessity when you submit for reimbursement. You cannot request reimbursement for a purchase made before the letter's date.

Keep reading: What's an HSA?, What's the Difference Between an HSA and an FSA?, What Can You Buy With an FSA or HSA?, Dependent Care FSA: How It Works, and all guides on this topic.

Sources

• IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans (FSA and HSA definitions, eligibility requirements, contribution limits, the FSA forfeiture rule, and plan year rules)

• HealthCare.gov Glossary (Health Savings Account and Health Reimbursement Arrangement definitions and general eligibility information)

• HealthCare.gov Glossary: Flexible Spending Account (FSA) (Plain-language definition of a Flexible Spending Account)

• IRS Newsroom: Tax Inflation Adjustments for Tax Year 2026 (2026 health care FSA contribution limit ($3,400) and maximum carryover ($680))

• Revenue Procedure 2025-19 (2026 HSA contribution limits ($4,400 self-only, $8,750 family))