Medical FSA limits for 2026: the $3,400 cap and $680 carryover

The 2026 limits at a glance

For plan years starting in 2026, the IRS allows you to set aside up to $3,400 of your salary in a medical FSA — up $100 from the 2025 limit of $3,300. If your employer's plan includes the carryover option, up to $680 of unused money (20% of the limit) can roll into the following plan year instead of being forfeited.

Plan year	Employee contribution limit	Max carryover to next year
2024	$3,200	$640
2025	$3,300	$660
2026	$3,400	$680

Source: IRS revenue procedures announcing annual inflation adjustments for cafeteria plans. Your employer's plan documents govern what your plan actually offers.

How the carryover actually works

Use-it-or-lose-it is the rule people remember, but most large employers soften it one of two ways — and the IRS allows a plan to offer either one, never both:

• Carryover: up to $680 for 2026 plan years rolls into the next year automatically. You keep contributing the full $3,400 in the new year too.
• Grace period: 2.5 extra months (into mid-March 2027 for a calendar plan) to spend down 2026 money. No dollar cap, but a hard deadline.

Anything above the carryover (or left after the grace period) is forfeited to the plan. That's the trade for the tax break: FSA money is exempt from federal income tax and payroll tax.

Choosing your 2026 election without guessing

The honest way to pick a number is to list last year's predictable costs — prescriptions, glasses, dental cleanings, copays for regular appointments — and fund those. Add the carryover cushion ($680) and the math gets forgiving: if you overshoot by less than the carryover, nothing is lost. A common pattern that works well:

• Start from known recurring costs (the ones you'd pay anyway).
• Add one moderately likely item — new glasses, a filling, a specialist visit.
• Stop there. The carryover absorbs a small miss; a big one means you bought things you didn't need to get a discount on them.

The Medicare trap: your FSA usually ends when you enroll

Here's the part that matters to readers of this site. A standard medical FSA is an employer plan, and once you enroll in Medicare you generally can no longer contribute to it — even if you're still working. Many people keep working past 65, get Part A automatically, and don't realize their FSA contributions should have stopped. Contributions after Medicare enrollment can create a tax problem that has to be corrected.

Two things to check before open enrollment at work:

• If you've enrolled in Medicare (or will during the plan year), stop medical FSA elections. A dependent-care FSA is different — it can continue.
• Money already in the account can still be spent on eligible care after Medicare enrollment; you just can't add more.

If you're heading into Medicare this fall, our Medicare Open Enrollment guide walks through the October 15 – December 7 window, and the key dates page puts every deadline on one calendar.

What an FSA can pay for (the short list)

Deductibles, copays, coinsurance, prescription drugs, glasses and contacts, dental work, hearing aids, and many over-the-counter items including pain relievers and first-aid supplies. It cannot pay insurance premiums — including Medicare premiums — and cosmetic procedures are out. Your plan's FSA store or card will filter eligible items automatically.