What is Flexible Spending Account (FSA)?

An FSA lets you set aside pre-tax dollars for qualified medical expenses (Healthcare FSA) or dependent care (DCFSA). Unlike an HSA, FSA funds generally must be spent within the plan year or you lose them (though many employers offer a $640 carryover or 2.5-month grace period). The 2026 Healthcare FSA limit is $3,300 and the DCFSA limit is $5,000. FSAs reduce your taxable income dollar-for-dollar.