2017 FSA Contribution Limit
For 2017, the FSA Contribution Limit is $2,600 (Health FSA salary reduction limit) and $500 (Maximum carryover).
Effective 2017-01-01Source: Publication 969 (2017), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)Verified 2026-08-29
Compared with 2016
| Item | 2016 | 2017 | Change |
|---|---|---|---|
| Health FSA salary reduction limit | $2,550 | $2,600 | +$50 (+2.0%) |
| Maximum carryover | $500 | $500 | +$0 (+0.0%) |
Who it applies to
Employees who participate in a health flexible spending arrangement (FSA) through their employer's cafeteria plan
What changed this year, and why
For 2017, the maximum salary reduction contribution to a health flexible spending arrangement (FSA) is $2,600. Employers may optionally allow participants to carry over up to $500 of unused health FSA amounts remaining at the end of the plan year for reimbursement of qualified medical expenses in the following plan year.
Common questions
- Can unused health FSA funds be carried over to the next year?
- An employer may, but is not required to, allow participants to carry over up to $500 of unused health FSA amounts from one plan year to the next.
Self-employed people cannot have a health FSA
Health FSAs must be established by an employer as part of a cafeteria plan. This means only people who work for an employer that offers such a plan can participate. Self-employed individuals cannot set up or contribute to a health FSA, even if they have earned income from a business. Employers have flexibility in designing their plans and can choose which benefits to include. Additionally, certain restrictions may apply to highly compensated participants or key employees to ensure the plan meets tax qualification requirements.
Health FSAs are employer-established benefit plans. These may be offered in conjunction with other em- ployer-provided benefits as part of a cafeteria plan. Em- ployers have complete flexibility to offer various combina- tions of benefits in designing their plan. Self-employed persons aren’t eligible for FSAs.
Publication 969 (2017), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
You elect once a year and cannot change it at will
At the start of each plan year, you choose a specific dollar amount to contribute to your health FSA through a salary reduction agreement. Your employer then deducts that amount from your pay periodically, usually each payday, throughout the year. Once you make this election, it is generally locked in for the entire plan year. You cannot increase or decrease your contribution at will. The only way to change or revoke your election is if you experience a qualifying change in your employment or family status that is recognized by the plan. This means careful planning is important when deciding how much to elect, since you cannot adjust it later simply because your expenses are higher or lower than expected. For 2017, the maximum salary reduction contribution is $2,600, though your employer may set a lower limit.
At the beginning of the plan year, you must designate how much you want to contribute. Then, your employer will de- duct amounts periodically (generally, every payday) in ac- cordance with your annual election. You can change or re- voke your election only if there is a change in your employment or family status that is specified by the plan.
Publication 969 (2017), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
The whole election is available on day one
One of the key features of a health FSA is that the entire elected amount is available to you from the first day of the plan year, even if you haven't yet contributed that amount through payroll deductions. This means if you elect to contribute $2,600 for the year, you can immediately access and be reimbursed for the full $2,600 in qualified medical expenses right at the start of the coverage period, regardless of how much has actually been deducted from your paycheck so far. The only requirement is that you use the funds for qualified medical expenses incurred during your coverage period. This immediate availability allows you to cover large medical expenses early in the year without having to wait until you've paid in the full amount through regular payroll contributions.
You must be able to receive the maximum amount of reimbursement (the amount you have elected to contribute for the year) at any time during the coverage period, regardless of the amount you have actually contributed.
Publication 969 (2017), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
Use it or lose it, and the two escapes from it
Health FSAs generally follow a use-it-or-lose-it rule, meaning any funds remaining in your account at the end of the plan year are forfeited and cannot be carried over to the next year. However, plans may offer one of two exceptions to avoid this forfeiture. First, the plan can provide a grace period after the plan year ends, during which you can use any remaining balance from the previous year to pay for qualified medical expenses incurred in that grace period. Second, the plan can allow a carryover of up to $500 of unused amounts to be used for qualified medical expenses in the following plan year. Your employer may choose to allow the carryover at the full $500 or at a lower amount. A plan may offer either the grace period or the carryover, but not both. Any unused amounts beyond the carryover limit are forfeited. These exceptions give participants additional time to use their funds, but careful planning is still essential to avoid losing money at year-end.
Plans may allow up to $500 of unused amounts remain- ing at the end of the plan year to be paid or reimbursed for qualified medical expenses you incur in the following plan year. The plan may specify a lower dollar amount as the maximum carryover amount. If the plan permits a carry- over, any unused amounts in excess of the carryover amount are forfeited.
Publication 969 (2017), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
What the money may be spent on, and what it may not
Health FSA funds can only be used to reimburse qualified medical expenses incurred by you, your spouse, your dependents, and certain other qualifying individuals such as children under age 27. Qualified medical expenses generally include costs for diagnosis, treatment, or prevention of disease, as well as treatments affecting any part or function of the body. However, there are specific expenses that cannot be paid from your FSA. You cannot use FSA funds for health insurance premiums, long-term care coverage or expenses, or amounts that are covered under another health plan. Additionally, you cannot receive distributions for over-the-counter medicines unless you have a prescription, except for insulin. It's important to understand what qualifies before making purchases, as non-qualified expenses cannot be reimbursed tax-free from your FSA.
You can’t receive distributions from your FSA for the following expenses. Amounts paid for health insurance premiums. Amounts paid for long-term care coverage or expen- ses. Amounts that are covered under another health plan.
Publication 969 (2017), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
Publication 969 (2017), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
- Health FSA salary reduction limit
Salary reduction contributions to your health FSA can’t be more than $2,600 a year
- Maximum carryover
Plans may allow up to $500 of unused amounts remain- ing at the end of the plan year to be paid or reimbursed for qualified medical expenses you incur in the following plan year. The plan may specify a lower dollar amount as the maximum carryover amount.