2018 FSA Contribution Limit
For 2018, the FSA Contribution Limit figures are $2,650 (Health FSA salary reduction limit) and $500 (Maximum carryover).
Effective 2018-01-01Source: Publication 969 (2018), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)Verified 2026-09-02
Compared with 2017
| Item | 2017 | 2018 | Change |
|---|---|---|---|
| Health FSA salary reduction limit | $2,600 | $2,650 | +$50 (+1.9%) |
| Maximum carryover | $500 | $500 | +$0 (+0.0%) |
Who it applies to
Employees who elect salary reduction contributions to a health flexible spending arrangement (FSA) through their employer's cafeteria plan for the 2018 plan year.
What changed this year, and why
For 2018, the IRS set the maximum salary reduction contribution to a health flexible spending arrangement (FSA) at $2,650. This limit is indexed for inflation and may differ in other years. An employer's plan may set a lower limit.
Common questions
- Is this limit adjusted each year?
- The salary reduction limit for health FSAs in 2018 is $2,650, indexed annually for inflation.
- What happens to unused FSA funds at the end of the plan year?
- Employers may allow up to $500 of unused funds to carry over to the next plan year, or they may offer a grace period instead - but a plan cannot offer both.
Self-employed people cannot have a health FSA
A health FSA is an employer-established benefit plan, typically offered as part of a cafeteria plan alongside other employer-provided benefits. Employers have flexibility in designing which benefits to include. However, self-employed individuals cannot establish or participate in a health FSA because the arrangement must be set up by an employer. Additionally, certain limitations may apply to highly compensated participants or key employees under the plan. The plan itself determines the specific benefit combinations offered, but the fundamental requirement remains that only employees of an employer who sponsors the plan are eligible to participate. This distinguishes FSAs from Health Savings Accounts, which self-employed individuals can use if they meet the other qualifying criteria.
Self-employed persons aren’t eligible for FSAs.
Publication 969 (2018), 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 must elect a single dollar amount that you want to contribute through payroll withholding for the entire year. Your employer then deducts that amount in equal installments, usually every payday. Once the election is in place, you cannot increase, decrease, or cancel it simply because your spending plans changed. The only way to modify or revoke the election mid-year is if you experience a qualifying change in employment or family status that the plan recognizes, such as a marriage, birth, or change in job status. This locked-in design means you must estimate your qualified medical costs carefully before the plan year begins, because you cannot adjust the election later to match what actually happens.
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 (2018), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
The whole election is available on day one
From the very first day of the coverage period you are entitled to receive reimbursements up to the full annual election amount, even though most of your salary-reduction contributions have not yet been withheld from your pay. For example, if you elect to contribute $2,650 for the year, you can submit a claim for the entire $2,650 in January, well before your payroll deductions have funded the account. The employer advances the full election amount and recovers it through the remaining paychecks. The maximum you can receive tax free is still capped at the total amount you elected to contribute for the year. This feature distinguishes an FSA from a savings account: you are spending promised future contributions today.
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. The maximum amount you can receive tax free is the total amount you elected to con- tribute to the health FSA for the year.
Publication 969 (2018), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
Use it or lose it, and the two escapes from it
Health FSAs follow a use-it-or-lose-it rule: any money left in the account when the plan year ends is generally forfeited and cannot be carried over to the next year. The IRS allows plans to adopt one of two relief mechanisms, but not both. First, a plan may offer a grace period extending beyond the end of the plan year, during which leftover funds can still reimburse eligible expenses incurred in that extension window. Second, a plan may permit a carryover of up to $500 of unused amounts into the next plan year, though the plan may set a lower carryover limit if it chooses. Any amount above the carryover limit is forfeited. A carryover does not reduce the $2,650 salary-reduction limit you may elect for the new year. Your employer cannot refund any remaining balance to you in cash.
A plan may allow either the grace period or a carryover, but it may not allow both.
Publication 969 (2018), 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 may be used only for qualified medical expenses, which are those specified in the plan document that generally would qualify for the medical and dental expenses deduction explained in Pub. 502. Non-prescription medicines other than insulin do not qualify unless you obtain a prescription for them. Expenses already covered by another health plan are not eligible. Reimbursements for health insurance premiums and long-term care costs are also excluded. The qualified expenses may be those incurred by you and your spouse, all dependents you claim on your tax return, certain persons you could have claimed as dependents, and any child under age 27 at the end of your tax year. Participants should consult their plan document and Pub. 502 to confirm which specific costs are covered.
Also, non-prescription medicines (other than insulin) aren’t considered qualified medical expenses for FSA pur- poses.
Publication 969 (2018), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
Only expenses from your period of coverage qualify for reimbursement
Under IRS rules, a health flexible spending arrangement only reimburses qualified medical expenses you incurred while you were actually covered under the plan. An expense from before your coverage began, or from after it ended, does not qualify even if you paid for it during the plan year. This is one reason the IRS recommends basing your election on a realistic estimate of what you expect to owe during the coverage period rather than overelecting. A separate feature of the arrangement is that you can receive the full amount you elected to contribute for the year at any point during the coverage period, even if you have not yet contributed that much through payroll. The tax-free maximum you may receive is the total amount you elected to contribute for the year. For 2018, that salary reduction limit is $2,650, so that is the most you can elect and therefore the most you can ever receive tax free from the arrangement for the year.
Generally, distributions from a health FSA must be paid only to reimburse you for qualified medical expenses you incurred during the period of coverage. 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. The maximum amount you can receive tax free is the total amount you elected to con- tribute to the health FSA for the year.
Publication 969 (2018), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
Having a general-purpose health FSA generally rules out an HSA
IRS rules treat enrollment in a general-purpose health flexible spending arrangement as incompatible with eligibility to contribute to a Health Savings Account. A general-purpose FSA reimburses a broad range of medical expenses, which is the same category of costs an HSA is intended for, so the two benefits overlap in a way the tax code does not allow. In practice, if you or your spouse are covered by a general-purpose FSA for a month, you are generally not an eligible individual for an HSA for that month. The way around this is to elect a limited-purpose FSA, which is restricted to dental, vision, or other permitted expenses and does not overlap with the HSA's medical-expense coverage. Employees who want to contribute to an HSA should coordinate with their benefits administrator before the plan year begins, because once a general-purpose FSA is in place for the year, HSA eligibility is blocked for the months covered.
Coverage during a grace period by a general purpose health FSA is allowed if the balance in the health FSA at the end of its prior year plan is zero.
Publication 969 (2018), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
You cannot be paid ahead of the expense, or paid twice for it
IRS rules prevent two specific abuses of health flexible spending arrangements. First, the plan cannot pay you for an expense before you actually incur it. You cannot be reimbursed in January for medical care you expect to receive in June; reimbursement is only available once the expense has been incurred, even though the full elected amount for the year is available from the first day of coverage. Second, you cannot be reimbursed more than once for the same expense. If your health FSA pays a claim, the same claim cannot later be submitted to another plan, a health reimbursement arrangement, or an insurance company. The FSA administrator is required to keep records showing what has been paid so that the same expense is not paid twice from any combination of tax-advantaged accounts. These rules apply regardless of whether the $2,650 salary reduction limit for 2018 has been reached.
You also must provide a written statement that the expense hasn’t been paid or reimbursed under any other health plan coverage. The FSA can’t make advance reim- bursements of future or projected expenses.
Publication 969 (2018), 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 (2018), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
- Health FSA salary reduction limit
Salary reduction contributions to your health FSA for 2018 are limited to $2,650 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.