2021 FSA Contribution Limit
The 2021 FSA Contribution Limit is $2,750.
Effective 2021-01-01Source: Publication 969 (2021), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)Verified 2026-09-02
Compared with 2020
Every figure on this page is unchanged from 2020.
| Item | 2020 | 2021 | Change |
|---|---|---|---|
| Health FSA salary reduction limit | $2,750 | $2,750 | +$0 (+0.0%) |
Who it applies to
Employees who participate in an employer-sponsored health flexible spending arrangement (health FSA) and make salary reduction contributions.
What changed this year, and why
For 2021, the IRS health FSA salary reduction limit is $2,750, unchanged from 2020.
Common questions
- What is a health FSA?
- A health FSA lets you put money aside before taxes to pay for qualified medical expenses. You elect an amount each year, and your employer withholds it from your pay.
- Can my plan set a lower limit than $2,750?
- Yes. The $2,750 limit is the maximum the IRS allows. Your employer's plan may set a lower limit.
- Does the limit change over time?
- Yes. The IRS indexes the limit for inflation, so it can increase in later years.
- What expenses can a health FSA reimburse?
- A health FSA covers qualified medical expenses such as deductibles, copayments, prescriptions, and certain medical supplies. For a full list, see IRS Publication 502.
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. Because the account is tied to an employer's plan, self-employed persons aren't eligible for FSAs. If you are self-employed - whether as a sole proprietor, independent contractor, or partner in a partnership - you cannot set up or contribute to a health FSA. Only employees of an employer that has chosen to offer the benefit can participate. Employers have flexibility in designing their plans and deciding which combinations of benefits to offer, so even among eligible employees, availability depends on whether the employer includes a health FSA in its benefits package. Certain limitations may also apply if you are a highly compensated participant or a key employee under the plan. If you are an employee and your employer offers a health FSA, you can elect to contribute through a salary reduction agreement, with contributions excluded from federal income and employment taxes, and reimbursements tax free when used for qualified medical expenses in 2021 up to $2,750.
Self-employed persons aren’t eligible for FSAs.
Publication 969 (2021), 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 the plan year, you must designate how much you want to contribute to your health FSA. Your employer then deducts that amount periodically, generally every payday, in accordance with your annual election. Once you have made this election, it is locked in for the entire plan year. You cannot change or revoke your contribution election at will - you can only do so if specifically allowed by law and the plan. This means mid-year changes are generally not permitted unless you experience a qualifying life event recognized by the IRS or your plan's terms explicitly allow a change. For 2021, salary reduction contributions to a health FSA cannot exceed $2,750. Because the election is binding for the year, it is important to estimate your qualifying medical expenses carefully before selecting your contribution amount. Note that for plan years ending in 2021, a plan may allow an employee to prospectively modify the contribution amount, but this still cannot exceed the annual dollar limitation.
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 (2021), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
The whole election is available on day one
A health FSA has a unique funding feature: you must be able to receive the maximum amount of reimbursement - the full amount you elected to contribute for the year - at any time during the coverage period, regardless of how much you have actually contributed so far. This means that on the very first day of the plan year, you can be reimbursed for the entire annual election amount, even though your employer has only withheld a small fraction of that sum from your paychecks. For 2021, if you elected to contribute the maximum $2,750, you could submit a claim for the full $2,750 immediately, even if only one or two pay periods of contributions had been deducted. This "spend before you fund" rule exists because the IRS requires that the full election amount be available throughout the coverage period. The employer bears the risk of funding any shortfall if you exhaust the account early and then leave the company before the full amount has been withheld from your pay. The maximum amount 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.
Publication 969 (2021), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
Use it or lose it, and the two escapes from it
Under the use-it-or-lose-it rule, funds in a health FSA that are not spent by the end of the plan year are generally forfeited. You cannot simply keep unused contributions in the account indefinitely or cash them out. However, the IRS permits two main exceptions that plans may offer. First, a plan may allow participants to carry over unused benefits from one plan year to the next. For example, unused benefits from a plan year ending in 2021 can be carried over to a plan year ending in 2022. Second, a plan may offer a grace period extending well beyond the end of the plan year during which you can use remaining funds for qualifying expenses. A plan can offer either the carry over or the grace period, but not both. Additionally, a plan may allow an individual who ceases participation in the health FSA to continue receiving reimbursements from unused benefits through the end of the plan year and through any grace period. Because of the forfeiture risk, you should base your contribution on a careful estimate of the qualifying medical expenses you expect during the year, keeping in mind that salary reduction contributions are subject to an annual limit.
Generally, contributed amounts that aren’t spent by the end of the plan year are forfeited. However, see Balance in an FSA, later, for possible exceptions.
Publication 969 (2021), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
What the money may be spent on, and what it may not
Money in a health FSA can only be used to reimburse qualified medical expenses as specified in your plan. These are generally the same expenses that qualify for the medical and dental expenses deduction described in Publication 502. Qualified expenses include those incurred by you, your spouse, your dependents, and your children under age 27. Recent law also allows over-the-counter medicines and menstrual care products to be treated as covered medical expenses. 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. Additionally, you cannot claim an itemized deduction on Schedule A for medical expenses that are reimbursed by the FSA. For 2021, the maximum salary reduction contribution to a health FSA is $2,750. Because FSA funds can only be used for qualifying expenses, review your plan document carefully to confirm what is covered before submitting claims.
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 (2021), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
Only expenses from your period of coverage qualify for reimbursement
For a health FSA in 2021, the IRS requires that only qualified medical expenses you actually incurred while your FSA coverage was active can be reimbursed. The plan will not pay for costs that arose before your enrollment began or after your coverage ended, even if you have money left in the account. This rule is tied to the use-it-or-lose-it principle: amounts you elected to contribute for the year that are not spent on qualifying costs during the coverage period are generally forfeited. Because of this timing requirement, the IRS advises basing your salary-reduction contribution on a realistic estimate of the qualifying expenses you expect to have during the plan year, rather than simply contributing the maximum $2,750 limit. You may receive the full elected amount at any point during the coverage period, regardless of how much you have contributed so far, but every reimbursement must trace to an expense that fell within that same period of coverage.
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 (2021), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
Having a general-purpose health FSA generally rules out an HSA
For 2021, having a general-purpose health FSA generally makes you ineligible to contribute to a Health Savings Account. To contribute to an HSA, you must be an eligible individual, which means you are covered by a high-deductible health plan and not covered by any other health plan that provides benefits before the deductible is met. A general-purpose health FSA counts as disqualifying coverage because it can reimburse medical expenses before you meet your HDHP deductible. This disqualification applies for any month in which you have the FSA coverage, so you cannot make HSA contributions during those months. There are exceptions: a limited-purpose FSA (restricted to dental and vision) or a post-deductible FSA (which only pays after the HDHP deductible is met) does not block HSA eligibility. But a standard health FSA that covers a broad range of medical expenses will prevent you from contributing to an HSA for as long as the FSA coverage continues.
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 (2021), 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 a health FSA in 2021, you cannot be reimbursed for an expense before it has actually been incurred, and you cannot be reimbursed more than once for the same cost. The plan must receive a written statement from an independent third party confirming that the medical expense has been incurred and stating the amount, along with a written statement from you that the expense has not already been paid or reimbursed under any other health plan coverage. Because of these substantiation requirements, the FSA cannot make advance reimbursements of future or projected expenses. In addition, you may only receive a distribution for qualified medical expenses you incurred during your period of coverage, so an expense that arose before your enrollment or after your coverage ended is not eligible for payment from the account.
You must provide the health FSA with a written state- ment from an independent third party stating that the med- ical expense has been incurred and the amount of the ex- pense. You must also 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 (2021), 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 (2021), Health Savings Accounts and Other Tax-Favored Health Plans (IRS)
- Health FSA salary reduction limit
For 2021, salary reduction contributions to a health FSA can’t be more than $2,750 a year (or any lower amount set by the plan).