2020 FSA Contribution Limit
The 2020 FSA Contribution Limit is $2,750.
Effective 2020-01-01Source: Publication 969 (2020), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)Verified 2026-09-02
Compared with 2019
| Item | 2019 | 2020 | Change |
|---|---|---|---|
| Health FSA salary reduction limit | $2,700 | $2,750 | +$50 (+1.9%) |
| Maximum carryover | $500 | -1 | - |
- the Consolidated Appropriations Act let a health FSA carry over every unused dollar from a plan year ending in 2020 to one ending in 2021, and from 2021 to one ending in 2022, so Publication 969 prints that relief in the place the carryover cap used to occupy
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 2020, the maximum salary reduction contribution to a health flexible spending arrangement (FSA) is $2,750, an increase over the 2019 limit.
Common questions
- Does the $2,750 limit apply to employer contributions?
- The health FSA salary reduction limit is the maximum an employee can elect to contribute on a pre-tax basis through payroll deductions. Employer contributions, if any, do not count against this limit.
- Is the limit adjusted each year?
- Yes. The limit was $2,700 in 2019. It is adjusted annually for inflation.
Self-employed people cannot have a health FSA
A health FSA is an employer-established benefit plan, often offered as part of a cafeteria plan alongside other employer-provided benefits. Because the account is tied to an employer's plan, self-employed individuals cannot have one. Even among employees who are offered an FSA, certain limitations may apply to highly compensated participants or key employees. The verified health FSA salary reduction limit of $2,750 applies to eligible employees for 2020.
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 plans. Self-employed persons aren’t eligible for FSAs.
Publication 969 (2020), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
You elect once a year and cannot change it at will
At the beginning of each plan year, you must designate how much you want to contribute to your health FSA. Your employer then deducts that amount periodically, typically every payday, according to your annual election. Once you make this election, it is locked for the entire year. You cannot change or revoke your contribution amount at will - you can only do so if specifically allowed by law and the plan. This means you should carefully estimate your qualified medical expenses for the year when making your election, as you generally cannot increase or decrease your contributions mid-year even if your circumstances change. The health FSA salary reduction limit for 2020 is $2,750.
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 specifically allowed by law and the plan.
Publication 969 (2020), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
The whole election is available on day one
Distributions from a health FSA are generally paid only to reimburse you for qualified medical expenses incurred during the period of coverage. A key feature of the health FSA is that 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 how much you have actually contributed so far. For example, if you elect to contribute $2,750 for 2020, the full $2,750 is available to reimburse a qualified medical expense on the very first day of the plan year, even though your payroll deductions have barely begun. This "spend before you fund" rule is what distinguishes a health FSA from a savings account: the entire election amount is front-loaded. The maximum you can receive tax free is the total amount you elected to contribute to the health FSA for the year.
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 (2020), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
Use it or lose it, and the two escapes from it
Generally, contributed amounts that aren't spent by the end of the plan year are forfeited - this is the "use it or lose it" rule. However, the IRS allows two exceptions. First, a health FSA may allow participants to carry over unused benefits from a plan year ending in 2020 to a plan year ending in 2021, and from a plan year ending in 2021 to a plan year ending in 2022. Second, a health FSA may extend the grace period for using unused benefits for a plan year ending in 2020 or 2021 to 12 months after the end of the plan year. A plan may adopt one of these two exceptions but not both. These provisions give participants extra time to incur qualified medical expenses and avoid forfeiture, but the basic rule remains: if you don't use the money and your plan offers neither a carryover nor a grace period, you lose it. You should base your contribution on a reasonable estimate of your qualified medical expenses for the year.
A health FSA may allow participants to carry over unused benefits from a plan year ending in 2020 to a plan year ending in 2021 and from a plan year ending in 2021 to a plan year ending in 2022. A health FSA may extend the grace period for using un- used benefits for a plan year ending in 2020 or 2021 to 12 months after the end of the plan year.
Publication 969 (2020), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
What the money may be spent on, and what it may not
Qualified medical expenses for a health FSA are those specified in the plan that would generally qualify for the medical and dental expenses deduction, as explained in IRS Publication 502. Expenses incurred after December 31, 2019, for over-the-counter medicine (whether or not prescribed) and menstrual care products are considered covered expenses. These qualified expenses can be incurred by you, your spouse, all dependents you claim on your tax return, and your child under age 27 at the end of your tax year. However, you cannot receive distributions from your FSA for amounts paid for health insurance premiums, amounts paid for long-term care coverage or expenses, or amounts that are covered under another health plan. If you are covered under both a health FSA and an HRA, special rules apply. These restrictions ensure that FSA funds are used only for eligible medical costs not covered by other insurance.
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 (2020), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
Only expenses from your period of coverage qualify for reimbursement
Under IRS rules, distributions from a health flexible spending arrangement may only be used to reimburse qualified medical expenses that were incurred during the period when the FSA coverage was in effect. This means the expense must arise while the individual is actually covered under the plan; costs incurred before coverage begins or after it ends do not qualify. Additionally, participants must be able to receive the maximum elected reimbursement amount at any point during the coverage period, even if they have not yet contributed that full amount through salary reductions. The maximum tax-free reimbursement equals the total amount elected to contribute to the health FSA for the year. For 2020, the salary reduction contribution limit for a health FSA is $2,750. Unused amounts generally are forfeited at the end of the plan year, though certain exceptions may apply.
Generally, distributions from a health FSA must be paid only to reimburse you for qualified medical expenses you incurred during the period of coverage.
Publication 969 (2020), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
Having a general-purpose health FSA generally rules out an HSA
Under IRS rules, if you are covered by a high-deductible health plan and also by a general-purpose health flexible spending arrangement that pays or reimburses qualified medical expenses, you generally cannot contribute to a Health Savings Account. This restriction applies because a general-purpose health FSA provides coverage for medical expenses before the minimum annual deductible of the high-deductible health plan has been met, disqualifying you as an eligible individual. However, there are exceptions. You can still contribute to an HSA if the FSA is a limited-purpose health FSA that only reimburses preventive care and certain items permitted alongside a high-deductible plan. Similarly, a suspended health reimbursement arrangement may allow HSA contributions. For 2020, the salary reduction limit for health FSA contributions is $2,750. If you are considering opening an HSA, review whether your current health FSA or other coverage disqualifies you before making contributions, as excess contributions are subject to additional taxes.
An employee cov- ered by an HDHP and a health FSA or an HRA that pays or reimburses qualified medical expenses can’t generally make contributions to an HSA.
Publication 969 (2020), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
You cannot be paid ahead of the expense, or paid twice for it
Under IRS rules for health flexible spending arrangements, you cannot be reimbursed before an expense has actually been incurred, and you cannot be reimbursed for the same expense more than once. The plan requires you to provide a written statement from an independent third party confirming the medical expense has been incurred and stating the amount. You must also provide a written statement that the expense has not been paid or reimbursed under any other health plan coverage. These substantiation requirements prevent both advance reimbursements of future or projected expenses and double reimbursements. For 2020, the salary reduction limit for health FSA contributions is $2,750. Debit cards, credit cards, and stored value cards provided by your employer may be used for reimbursements if they meet certain substantiation methods, but the underlying expense must still have been incurred and not previously reimbursed.
The FSA can’t make advance reim- bursements of future or projected expenses.
Publication 969 (2020), 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 (2020), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
- Health FSA salary reduction limit
Health Flexible Spending Arrangements (FSAs) limi- tation. Salary reduction contributions to your health FSA for 2020 are limited to $2,750 a year.