IRS Releases New 2025 FSA Contribution Limits

Concept art showing a notebook with &quot;flexible spending account&quot; written in it.

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published 14 November 2024

The IRS just announced the new 2025 contribution limits for medical savings accounts like flexible spending arrangements (FSAs) and healthcare savings accounts (HSAs).

Employer-sponsored FSAs allow you to build up a savings nest egg by deducting pretax dollars from your payroll. You can use those funds to pay for qualifying medical expenses or items, some of which are included on Amazon.

If you participate in one of these accounts, your contributions are tax-free. That means they are not subject to federal income tax, Social Security, or Medicare taxes. However, if you exceed those contribution limits, you could face financial penalties.

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The good news: FSA and HSA contributions are higher for 2025 than last year. Here’s what you need to know.

New FSA limit for 2025

With a flexible spending account, your contributions can be used to pay for certain out-of-pocket health care costs for you, your spouse, and your dependents. As mentioned, the money you chip into the account is tax-free.

There’s one caveat: FSAs aren’t available for self-employed taxpayers. Additionally, your employer may opt to add to your FSA account, but they aren’t required to.

If you have an FSA account, here are the maximum amounts you can contribute for 2025 (tax returns normally filed in 2026).

The FSA contributions limit for 2025 is $3,300, that’s up from $3,200 the previous year.
If your spouse has a plan through their employer, they may also contribute up to $3,300 through payroll deductions in 2025. That means the couple could jointly contribute up to $6,600 for their household.

The maximum carryover of unused amounts to 2025 is $660, up from $640 in tax year 2024.

FSA tax advantages

FSAs are employer-sponsored savings accounts that allow you to set aside money from your paycheck, pre-tax, to pay for your healthcare and dependent care expenses.

You can use your FSA savings to pay for certain medical expenses such as deductibles, co-pays, or medical appointments. According to the IRS, some qualifying expenses include, but are not limited to:

Prescription medications and over-the-counter (OTC) medications, with a doctor’s prescription.
Medical equipment and supplies such as bandages and diagnostic devices.
Prescription eyeglasses and dental work.

You can also use your FSA funds to pay for dependent care expenses for your child or elder care, that are not covered by your insurance.

Penalty for making excess contributions

If you surpass the contribution threshold on your FSA account, you will have to pay regular income taxes on the amount that exceeds the limit. But that’s not all. An excise tax of 6% will also apply to any amount over the contribution limit.

You can withdraw the excess funds before the federal tax filing deadline to avoid the penalty.

Why you should get an FSA

An FSA allows you to build savings using pre-tax dollars from your paycheck for qualifying medical expenses such as doctor’s visits, vision care, dental care, prescriptions, over-the-counter medications, or certain medical diagnostic devices.

A flexible spending account is often offered as a benefit from your employer. For 2025, you can contribute up to $3,300 tax-free, and the funds can be a safety net in case you ever need to pay out-of-pocket for some of the expenses mentioned above.

Be aware: if you don’t spend all the cash in your FSA by the end of the year, you will forfeit that remaining balance to your employer. Additionally, if you surpass your contribution limit every dollar above the threshold will be subject to tax.

If you’re self-employed and FSA is not an option for you, and you’re covered under a high deductible health plan (HDHP) you may want to consider a health savings account (HSA).

Before making a decision, make sure to understand the eligibility requirements, limitations, or expenses tied to these savings accounts.

Gabriella Cruz-Martínez is a seasoned finance journalist with 8 years of experience covering consumer debt, economic policy, and tax. Before joining Kiplinger as a tax writer, her in-depth reporting and analysis were featured in Yahoo Finance. She contributed to national dialogues on fiscal responsibility, market trends and economic reforms involving family tax credits, housing accessibility, banking regulations, student loan debt, and inflation.

Gabriella’s work has also appeared in Money Magazine, The Hyde Park Herald, and the Journal Gazette & Times-Courier. As a reporter and journalist, she enjoys writing stories that empower people from diverse backgrounds about their finances no matter their stage in life.