2020 FSA Limits

Updated on: January 7th, 2021

Reviewed by Kim Buckey

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Unplanned medical expenses can wreak havoc on your finances. But if your employer offers you access to a Health Care Flexible Spending Account (FSA), you may be able to keep more money in your pocket. 

An FSA is an account that lets you set aside pre-tax dollars for certain out-of-pocket healthcare expenses, such as deductibles, co-payments, and prescriptions.1 Since your employer owns and controls the account, your employer sets the rules for participation.2 Your employer can also contribute to the account, though that’s not mandatory.3

Since you fund the account with pre-tax dollars, there are tax advantages to contributing to an FSA.  If you put $2,000 in an FSA, you reduce your taxable income by $2,000, which could lead to a lower tax bill.4  However, the Internal Revenue Service (IRS) sets limits on how much you can contribute to an FSA each year.5

What You Need to Know

If you’re considering taking advantage of an employer-sponsored FSA:

Know when the funds will be available. Even though you’ll likely be making your contributions to your FSA over the course of the year, the entire amount you plan to contribute will be available the first day of the plan year.6 

Plan your contributions carefully. You don’t want to contribute $1,000 more dollars than you think you’ll need. FSA funds are meant to be used within one plan year, though you may be given up to 2 ½ months extra as a grace period to spend unused funds or you may be able to roll over $500 per year.7

Make sure you know the 2020 FSA limits. Each year the IRS caps the amount you’re able to set aside in an FSA. In 2020 the limit is $2,750.8

Who Can Contribute to an FSA?

If your employer offers an FSA as a benefit and you meet the employer’s requirements for eligibility, you can contribute to an FSA.9 Unlike with health savings accounts, another type of tax-advantaged account that lets you set aside pre-tax dollars for medical expenses, you do not have to have a high deductible health plan (HDHP) in order to contribute to an FSA.10 

However, those who have an HDHP may benefit from having what’s known as a Limited Purpose Flexible Savings Account (LPFSA). An LPFSA is designed to pay for eligible dental and vision benefits for someone who has health insurance coverage through an HDHP.11 

When Can You Change Your FSA Contributions?

Each year, you can change your FSA contributions during your company’s annual benefits open enrollment season.12 However, you can also make changes if you have a qualifying life event such as a change to your marital status, a change in your number of dependents, or a court order that affects your health coverage or that of someone in your household.13 

In 2020, the IRS allowed employers to give employees the option to make mid-year changes to their FSA contributions because of the pandemic’s effect on workers across the country.14

A Word of Advice

If your employer offers access to an FSA, it is a valuable benefit you should not overlook. 

When Can You Use an FSA?

When you determine what your annual contribution will be to your FSA, that amount is available to you on the first day of the plan year even if you haven’t made a single contribution yet.15 You can use the money in your FSA to pay for eligible medical and dental expenses for yourself, your spouse or any dependents. 

While you can’t use FSA funds to pay insurance premiums, you can use them to pay for expenses such as deductibles, medical equipment such as crutches, and even medical supplies such as bandages and blood sugar test kits.16 In 2020, thanks to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the list of eligible expenses that can be reimbursed through an FSA was expanded to include menstrual care products such as pads and tampons as well as over-the-counter medications without a prescription.17 

Important to Know

An FSA allows you to set aside pre-tax dollars for certain out-of-pocket healthcare expenses, such as deductibles, co-payments, medical supplies, dental expenses, and over-the-counter medications.

How Much Can You Roll Over?

So what happens if you don’t use all of the money in your FSA one year? You may have one of two options available to you. Your employer can either give you a grace period of up to 2 ½ months to use whatever funds you have left at the end of the year, or they can let you roll over $500 to the following year.18 In mid-2020, the IRS raised the rollover amount to $550 due to the impact of the COVID-19 pandemic.19 But keep in mind that neither the grace period nor the rollover are required, so read your plan materials carefully.

FSA Limits 2019 vs 2020

FSA limits typically don’t remain static. For that reason, it’s important to check the limits each year before you determine your contributions. The IRS raised contribution limits for FSAs from $2,700 in 2019 to $2,750 in 2020 and left the limit at $2,750 for 2021.20

Next Steps 

If your employer offers access to an FSA, it’s a benefit you should not overlook. By thinking carefully about how much you’ll likely need for medical expenses and using the account to put that money aside, you’ll be better prepared for any health challenges while enjoying a tax break at the same time. 



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  1. U.S. Government Web site for the Federal Health Insurance Marketplace.  “Using a Flexible Spending Account (FSA).” healthcare.gov (accessed October 27, 2020).

  2. U.S. Department of the Treasury. “Treasury Modifies ‘Use-Or-Lose’ Rule for Health Flexible Spending Arrangements.” treasury.gov (accessed October 27, 2020).

  3. U.S. Government Web site for the Federal Health Insurance Marketplace.  “Using a Flexible Spending Account (FSA).”

  4. H&R Block. “Health Savings Account & Flexible Spending Account.” hrblock.com (accessed October 27, 2020).

  5. Internal Revenue Service. IRS: Eligible employees can use tax-free dollars for medical expenses.” irs.gov, November 15, 2019 (accessed October 27, 2020).

  6. Wisconsin Department of Employee Trust Funds. “Health Care Flexible Spending Account (FSA).” etf.wi.gov (accessed October 28, 2020).

  7. U.S. Government Web site for the Federal Health Insurance Marketplace.  “Using a Flexible Spending Account (FSA).”

  8. Internal Revenue Service. IRS: Eligible employees can use tax-free dollars for medical expenses.”

  9. Internal Revenue Service. IRS: Eligible employees can use tax-free dollars for medical expenses.”

  10. H&R Block. “Health Savings Account & Flexible Spending Account.”

  11. Wisconsin Department of Employee Trust Funds. “Limited Purpose Flexible Spending Account (LPFSA).” etf.wi.gov (accessed October 27, 2020).

  12. Stephen Miller, CEBS. “Open Enrollment Guide & Resources.” shrm.org (accessed October 27, 2020).

  13. Society for Human Resource Management. “Under what circumstances can employees make midyear election changes to their health Flexible Spending Account?” shrm.org, May 13, 2020 (accessed October 27, 2020).

  14. Stephen Miller, CEBS. “IRS Allows Midyear Enrollment and Election Changes for Health Plans and FSAs.” shrm.org, May 15, 2020 (accessed October 27, 2020).

  15. Wisconsin Department of Employee Trust Funds. “Health Care Flexible Spending Account (FSA).”.

  16. U.S. Government Web site for the Federal Health Insurance Marketplace.  “Using a Flexible Spending Account (FSA).”

  17. Internal Revenue Service. “IRS outlines changes to health care spending available under CARES Act.” irs.gov, June 17, 2020 (accessed October 28, 2020).

  18. U.S. Government Web site for the Federal Health Insurance Marketplace.  “Using a Flexible Spending Account (FSA).”

  19. Congressional Research Service. “Potential COVID-19 Impacts on Health Flexible Spending Arrangements (FSAs) and Recent Health FSA Changes.” crs.reports.congress.gov, June 15, 2020 (accessed October 28, 2020).

  20. Internal Revenue Service. IRS: Eligible employees can use tax-free dollars for medical expenses.”