2018 FSA Contribution Limit
For 2018, the FSA Contribution Limit is $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 2026-08-29
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)
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.