FSA Contribution Limits for 2024
A Health FSA enables employees to allocate funds from their paycheck towards qualified healthcare expenses without incurring taxes on the money saved. This account can be utilized by employees for their own healthcare expenses, as well as those of their spouses and children who are considered dependents. For 2024, the maximum annual FSA contribution limits will be $3,200, an increase from $3,050 in 2023.
Health FSA Carryover Limit
The annual FSA Carryover limit is indexed to the annual contribution limit at a rate of 20%. With the annual FSA limit increasing for 2024, the annual FSA Carryover limit is also increasing to $640. This compares to a Carryover limit of $610 in 2023.
Dependent Care FSAs
Some employers offer Dependent Care FSAs, also known as DCFSAs, to provide employees with the option of setting aside funds for childcare or adult care while they attend work or school. With each payroll, the employee contributes to the DCFSA before taxes. After utilizing the care services and submitting the necessary claim, the employee can receive reimbursement from the account. For 2024, DCFSA contribution limits will be $5,000 for married filing jointly or head of household and $2,500 for married filing separately.
Annual FSA Contribution Limits
Health FSA Carryover
DCFSA: Married Filing Jointly or Head of Household
DCFSA: Married Filing Separately
2024 FSA Contribution Limit
2023 FSA Contribution Limit
Important Notes about Health FSAs
- There are three different plan types for Health FSAs:
- Use it or lose it - participants that don't use up all of their FSA funds before the end of the plan year will forfeit them
- Carryover - account holders have the option to roll over any leftover funds, up to $640, from the current plan year to the next one
- Grace Period - participants are given a grace period of 2.5 months after the end of the plan year to use any funds that were not spent
- Due to the uniform coverage rule, individuals with a Health FSA have the ability to use their entire annual contribution on the first day of the plan year, effectively obtaining an interest-free loan. For example, if a participant decides to allocate $2,000 for the year and incurs a medical expense of $2,000 on the first day of the plan year, they can use the full amount of their FSA funds to pay for the expense, even though the funds have not yet accumulated in their account. Throughout the year, the individual's FSA contributions will be deducted from their paycheck at the same rate. However, once all the funds have been spent, their available balance will be zero.
- FSAs are owned by the employer, despite being funded by the employee. In the event that an employee departs from the company for any reason, the funds within the FSA will remain with the employer.
Important Notes about Dependent Care FSAs
- An individual can utilize their DCFSA to cover the cost of care services while they, or their spouse, are employed, seeking employment, or attending school.
- DCFSAs typically cover services such as daycare, before and after school care, day camps, and adult care for qualified dependents such as children aged 0-12 years, spouses who cannot physically or mentally care for themselves, or other dependents who are unable to physically or mentally care for themselves.
- A DCFSA cannot be used for babysitting or to pay for someone who lives in your home to care for younger children.
- A DCFSA operates on a "use it or lose it" basis. Any funds remaining in the account at the end of the year will be forfeited. When enrolling in a DCFSA, it is advisable to create an estimate of expenses before selecting the amount to allocate. Typically, it is not possible to modify contributions once the plan year has begun.
- See IRS Publication 503 for more information.
DataPath, Inc. creates high-tech, cloud-based administrative solutions for FSA, Dependent Care, HRA, HSA, LSA, transit, COBRA, and billing account management.