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Tax

FSA contribution limits for 2026, and what actually carries over

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The IRS raised the 2026 health FSA contribution limit by $100 and the maximum carryover by $20 — routine, incremental changes. The dependent care FSA limit did something much bigger: its first real increase in about forty years.

Written by David Williams Reviewed by Michael Johnson 6 min read

The IRS raised the 2026 health flexible spending account contribution limit to $3,400, up $100 from $3,300 in 2025. The maximum carryover into the following year rises alongside it, to $680. Both are ordinary, inflation-driven bumps of the kind the IRS makes to dozens of thresholds every October. What is not ordinary this year is the dependent care FSA, which jumps from $5,000 to $7,500 per household — a change written into law rather than produced by an inflation formula, and the first real increase to that figure in about four decades.

The 2026 health FSA limit, and where it came from

On October 9, 2025, the IRS published Revenue Procedure 2025-32, the annual notice that sets the following year's inflation-adjusted limits across dozens of tax provisions. It set the 2026 limit on employee salary-reduction contributions to a health FSA at $3,400, up from $3,300 for 2025 and $3,200 for 2024. The figure applies per employee, not per household — two spouses who each have access to their own employer's FSA can each contribute up to the full $3,400, for a combined $6,800 household total, even if they are on the same health plan.

This limit covers a general-purpose or limited-purpose health FSA used for medical, dental and vision costs not covered by insurance. It is separate from, and does not affect, the contribution limit on a health savings account, which is a different account tied to a high-deductible health plan and adjusted under its own separate IRS schedule.

The carryover: $680, and only if your plan offers it

Health FSAs are subject to a "use it or lose it" rule by default: money left in the account at the end of the plan year is forfeited back to the employer. Two optional features soften that, and an employer can offer one or the other but never both in the same plan year.

  • A carryover. Up to a capped dollar amount of unused funds rolls into the next plan year on top of whatever you elect to contribute that year. For plan years starting in 2026, that cap is $680, up from $660 for 2025. An employer can set a lower carryover cap than the IRS maximum, or none at all, so the figure to check is your own plan document, not this one.
  • A grace period. Instead of a carryover, a plan can give employees up to two and a half extra months after the plan year ends to spend the previous year's remaining balance, with no cap on the amount.

A plan that offers neither feature is a strict use-it-or-lose-it plan, and that is still common — checking your own summary plan description is the only reliable way to know which rule applies to you before you decide how much to elect for 2026.

Why the limit and the carryover are not the same decision

It is worth separating two different numbers when you set next year's election: how much you plan to contribute, and how much of this year's balance you expect to still be sitting there in January. The contribution limit of $3,400 caps what goes in through payroll deductions. The carryover cap of $680 only matters to money already in the account that you did not spend — it has no effect on your new election, which starts from zero regardless of what carries over. Electing the full $3,400 while expecting to carry over $680 as well is entirely allowed; the two figures are not netted against each other.

The practical risk sits on the other side: overestimating next year's medical costs still means money left over in excess of whatever your plan allows to carry forward or spend in a grace period, and that excess is forfeited. Reviewing this year's actual spending before setting next year's election is the single most useful thing to do during open enrollment.

The bigger story: dependent care FSAs, $5,000 to $7,500

The dependent care FSA, used to pay for childcare or care for a dependent adult so a parent can work, had been capped at $5,000 per household ($2,500 for a married person filing separately) since it was set in the mid-1980s — never adjusted for inflation in the decades since. Legislation enacted in 2025 changed that permanently, raising the limit to $7,500 per household ($3,750 filing separately) starting with the 2026 plan year. Unlike the health FSA limit, this new figure is not automatically re-indexed for inflation going forward, so it will take another act of law, not an annual IRS notice, to move it again.

For a household that has been maxing out the old $5,000 limit, the change is worth confirming with your employer specifically: the plan document itself has to be amended to offer the higher limit, so it is not automatic simply because the law changed. Ask during open enrollment whether your employer's dependent care FSA has been updated for 2026 before assuming you can elect the full $7,500.

What the money can actually be spent on

A health FSA covers IRS-defined qualified medical expenses: copays, deductibles, prescriptions, dental and vision care, and a wide range of over-the-counter items. It cannot be used for insurance premiums themselves. A dependent care FSA is narrower still — it covers care that allows a parent or guardian to work or look for work, such as daycare, preschool tuition below kindergarten, before- and after-school care, and adult day care for a dependent unable to self-care, but not schooling once a child reaches kindergarten age or later, and not care provided by someone claimed as a dependent on your own return.

Setting your 2026 election

Three checks are worth doing before open enrollment closes. First, pull up how much you actually spent and how much you forfeited in the current plan year — that history is a better guide than a guess. Second, confirm in writing whether your specific plan offers a carryover, a grace period, or neither, since the answer changes how aggressively you should elect. Third, if you have dependent care costs, ask your employer directly whether the FSA plan has been updated to the new $7,500 limit for 2026, since the increase in the law does not automatically appear in every plan without an amendment.

Sources

This is general information, not tax advice. Specific FSA features — including whether a carryover, a grace period, or the higher dependent care limit apply — are set by each employer's own plan document. Check your own plan's summary before making an election, or speak with a licensed tax professional.

Common questions

What is the FSA contribution limit for 2026?
The health FSA limit for 2026 is $3,400 per employee, up $100 from $3,300 in 2025. It comes from IRS Revenue Procedure 2025-32, released in October 2025. The dependent care FSA limit is a separate figure, rising much further to $7,500 per household in 2026.
How much health FSA money can I carry over into 2026?
Up to $680, if your employer's plan allows a carryover at all — this is the IRS maximum, and a plan can set a lower cap or offer no carryover. Some plans offer a grace period of up to two and a half extra months instead, but never a carryover and a grace period together.
What happens to unused FSA money if my plan has no carryover or grace period?
It is forfeited to your employer at the end of the plan year under the standard "use it or lose it" rule. This is why estimating your coming year's eligible expenses carefully, rather than electing the maximum by default, matters more with a strict plan than with one offering a carryover.
Why did the dependent care FSA limit increase so much more than the health FSA limit?
The health FSA limit is adjusted every year by a routine IRS inflation formula. The dependent care FSA limit of $5,000 had not moved since it was set in the 1980s because it was never written into that formula. Legislation passed in 2025 raised it directly to $7,500 for 2026 and beyond, which is a change in the underlying law rather than an annual inflation adjustment.
Can I use FSA funds for health insurance premiums?
No. A health FSA can be used for qualified out-of-pocket medical, dental and vision expenses, but not to pay insurance premiums, whether for an employer plan, an individual marketplace plan, or Medicare.
Is the dependent care FSA increase automatic in my employer's plan?
Not necessarily. The higher limit is allowed under the new law, but an employer's FSA plan document has to be amended to actually offer it. Confirm with your HR or benefits team during open enrollment that your plan has adopted the $7,500 limit before assuming you can elect it.