You're staring at that open enrollment screen, and the clock is ticking. You have to decide exactly how much to siphon off your paycheck into a Flexible Spending Account (FSA). It’s a gamble. If you put in too little, you’re essentially handing the IRS money that could have stayed in your pocket tax-free. If you put in too much? You lose it. The "use it or lose it" rule is the boogeyman of corporate benefits, and it scares people into being overly cautious.
But here’s the thing: most people leave money on the table because they don’t actually know their own health patterns. They guess. They "vibe" it. That's a mistake.
Deciding how much should I put in my FSA requires a mix of cold, hard math and a bit of honest self-reflection about how often you actually visit the doctor. For 2026, the IRS has set the contribution limit at $3,300 for healthcare FSAs. That’s a decent chunk of change. If you’re in a 24% tax bracket, maxing that out could save you nearly $800 in taxes. But you shouldn't just hit the max because you can. You need a plan that covers your predictable costs without creating a frantic shopping spree at the CVS website every December 31st.
The basic math of the "Use It or Lose It" trap
The IRS is strict. Historically, any money left in your FSA at the end of the plan year went straight back to your employer. They don't keep it—they usually use it to offset the costs of administering the plan—but you definitely don't see it again. However, things have softened slightly in recent years.
Check your specific plan documents right now. Your employer might offer one of two "safety valves." The first is a carryover. For 2026, the IRS allows you to carry over up to $660 into the 2027 plan year. If your company opts for this, the risk of "losing it" drops significantly. The second option is a grace period. This gives you an extra 2.5 months (usually until March 15th) to spend the previous year's funds.
You cannot have both. It’s one or the other, or neither. If your company offers neither, you need to be surgical with your estimate.
💡 You might also like: Philip H. Corboy Law Center: Why This Chicago Hub Still Matters
Looking backward to move forward
The best predictor of next year’s health costs is last year’s receipts. Seriously. Log into your insurance portal—whether it’s Blue Cross, Aetna, or UnitedHealthcare—and look at your "Explanation of Benefits" (EOB) statements from the past 12 months.
Add up:
- Every single $20, $30, or $50 co-pay.
- The cost of your monthly maintenance medications.
- That random urgent care visit when you thought you had strep.
- Dental cleanings and that one filling you’ve been putting off.
- New glasses or a year's supply of contact lenses.
That total is your "Floor." This is the absolute minimum you should contribute because you know you’re going to spend it. If your total co-pays were $600 and your contacts cost $400, putting $1,000 into your FSA is a no-brainer. You're basically getting a 20-30% discount on those items because you’re paying with pre-tax dollars.
The "Invisible" expenses you’re probably forgetting
When people ask "how much should I put in my FSA," they usually only think about doctors. They forget the pharmacy aisle. Since the CARES Act and subsequent updates, the list of FSA-eligible items has exploded. You can now use FSA funds for over-the-counter (OTC) medications without a prescription.
Think about the stuff you buy anyway. Tylenol. Menstrual products. Sunscreen (SPF 15+). Band-aids. Acne cream. High-end skincare that happens to have salicylic acid. Even certain high-tech items like vibrating foam rollers for recovery or smart thermometers are often eligible.
If you spend $50 a month on these basics, that’s another $600 a year. Suddenly, that "conservative" $500 contribution looks way too low. You’re actually spending closer to $1,500 on health-related needs, and you're paying for it with post-tax money like a chump.
Life changes and the "Crystal Ball" factor
Are you planning to get braces in 2026? Are you finally going to get LASIK? Is there a baby on the way?
✨ Don't miss: NJ-W4: How to Avoid the New Jersey Tax Surprise
These are the big-ticket items that justify maxing out the account. If you know you have a $3,000 dental procedure coming up, you put the full $3,300 in. Why? Because of the "Uniform Coverage Rule." This is a little-known perk of FSAs: your entire annual contribution is available to you on Day 1 of the plan year, even though it hasn't been deducted from your paycheck yet.
If you have a $2,000 surgery in January, you can use your FSA card to pay for it immediately. If you were to quit your job in February, you wouldn't have to pay back the remaining balance. It’s a weird, rare win for the employee.
On the flip side, if you're transitioning to a High Deductible Health Plan (HDHP) with a Health Savings Account (HSA), be careful. You generally cannot have a traditional healthcare FSA and an HSA at the same time. You might be limited to a "Limited Purpose FSA," which only covers dental and vision. Don't double-dip, or the IRS will have words with you.
How to handle the uncertainty
If you're still nervous, use the "Rule of 80%." Calculate your expected costs and then only contribute 80% of that number. It leaves you a buffer. It’s better to pay for one or two prescriptions out-of-pocket at the end of the year than to be stuck buying 14 tubes of expensive sunscreen on December 30th just to "use up" the balance.
Also, consider your cash flow. FSA contributions are deducted equally from every paycheck. If you’re living paycheck-to-paycheck, a $275 monthly deduction (to hit the $3,300 max) might hurt. Make sure the tax savings are worth the reduction in your take-home pay. For most, the tax savings are significant enough that it’s worth the slight squeeze.
The dependent care curveball
Don't confuse your healthcare FSA with a Dependent Care FSA. The limits are different. For 2026, the limit for dependent care is typically $5,000 per household. If you have kids in daycare or after-school programs, you almost always want to max this out. Daycare costs are so predictably high that there's almost zero risk of having leftover money. In fact, most people spend the $5,000 by April.
Finalizing your number
Stop guessing.
Go get your credit card statements from last year. Search for "CVS," "Walgreens," and your local doctor’s office. Seeing the actual numbers usually shocks people. Most realize they’ve been spending way more than they thought.
💡 You might also like: Somalia Currency to USD: Why the Shilling Still Matters in a Dollarized World
If you’re healthy, single, and haven't seen a doctor in two years, maybe you just stick to $500 for the "just in case" meds and a new pair of sunglasses (yes, prescription ones count). If you have a family of four and a chronic condition, the $3,300 limit probably isn't even enough.
Actionable steps for your 2026 enrollment:
- Check for the Carryover: Ask HR if your plan allows the $660 carryover. If they do, be aggressive with your contribution.
- Audit your "Amazon Health" spending: Look at your order history for first aid, sun care, and OTC meds.
- Schedule your big stuff: If you need a procedure, get a quote now. Put that exact amount into the FSA.
- Use the FSA Store: If you find yourself with $100 left in December, don't panic. Use sites like FSAstore.com to find guaranteed eligible items you actually need.
- Adjust for inflation: Remember that the 2026 limit of $3,300 is higher than previous years. If you maxed out last year, you can add more now.
The goal isn't to perfectly hit zero on December 31st. The goal is to maximize the amount of your income that never gets touched by the taxman while ensuring you can afford to stay healthy. Take twenty minutes, do the math, and stop donating your hard-earned money to the government.