FSA Contribution Limit 2027: What Employees and HR Teams Need to Know

What is Flexible Spending Account (FSA)?

The IRS hasn't published the official FSA contribution limit for 2027 yet, and it typically won't until fall 2026. But based on how the IRS has adjusted the limit every year since 2020, you can expect the 2027 healthcare FSA limit to land somewhere between $3,400 and $3,600 per employee, up slightly from the confirmed 2026 limit of $3,400 (IRS Revenue Procedure 2025-32) and the 2025 limit of $3,300 (Revenue Procedure 2024-40). Nobody can give you an exact 2027 number this far out, and anyone who tells you otherwise is guessing. What you can do right now is understand how the number gets set, plan your election range, and get your open enrollment paperwork ready so you're not scrambling when the IRS finally drops the real figure.

This guide walks through how Flexible Spending Accounts actually work, what's changed in recent years, and what both employees and HR admins should be doing today to get ready for the 2027 plan year.

What Is an FSA and How Does It Actually Work?

A Flexible Spending Account (FSA) is a tax-advantaged account your employer sets up that lets you set aside part of your paycheck, before taxes, to pay for eligible health or dependent care costs. You pick an amount during open enrollment, that amount gets divided across your paychecks for the year, and the money comes out pre-tax. That's the whole appeal: you're paying for things you'd already be buying, like copays or daycare, with money that never got taxed in the first place.

There are a few different flavors. The most common is the Healthcare FSA, which covers medical, dental, and vision expenses not covered by insurance. There's also the Dependent Care FSA, which covers daycare, preschool, and elder care so you can work. Some employers offer a Limited Purpose FSA for people enrolled in an HSA-eligible plan, which only covers dental and vision.

One thing that trips people up: an FSA is use-it-or-lose-it by design. Unlike an HSA, the money doesn't automatically follow you year to year unless your employer's plan document specifically allows a carryover or grace period, which we'll get into below. That's why picking the right contribution amount matters so much, and why the annual IRS limit is worth watching every fall.

What Will the FSA Contribution Limit Be for 2027?

Here's the honest answer: as of this writing, the IRS has not released the 2027 limit. The agency announces the next year's FSA limit through a Revenue Procedure, usually published in October or November of the prior year, as part of its broader annual inflation adjustments (the same announcement also covers HSA limits, retirement plan limits, and standard deductions). For 2027, that announcement is expected in fall 2026.

What We Know So Far

To make a reasonable projection, it helps to look at the pattern:

●2023 limit: $3,050 (Revenue Procedure 2022-38)

●2024 limit: $3,200 (Revenue Procedure 2023-34)

●2025 limit: $3,300 (Revenue Procedure 2024-40)

●2026 limit: $3,400 (Revenue Procedure 2025-32)

The year-over-year increases have ranged from $100 to $150, tracking the Chained Consumer Price Index (C-CPI-U) that the IRS uses for inflation adjustments under Internal Revenue Code Section 125. If inflation stays roughly where it's been, a 2027 limit somewhere in the $3,400 to $3,600 range is a reasonable working assumption for planning purposes, but treat it as a placeholder, not a fact, until the IRS makes it official.

Why This Matters for Your Election

HR teams building open enrollment materials for a 2027 plan year that starts January 1, 2027 will likely need to finalize communications before the IRS number is even out. Our recommendation: build your enrollment platform and communications using the current confirmed limit ($3,400 for 2026), and plan to update the figure as soon as the Revenue Procedure drops. Most payroll and TPA systems, including CafeHealth's, can adjust the cap quickly once the number is confirmed, so don't let uncertainty about the exact figure delay your enrollment prep.

How Do Carryover and Grace Period Rules Work?

This is where a lot of employees get confused, so let's break it down plainly. Employers get to choose one of three options for unused FSA money, not a combination:

●Carryover: Employees can roll over a limited amount of unused funds into the next plan year. The cap is tied to 20% of the annual contribution limit, rounded down to the nearest $10. For 2025, that meant a maximum carryover of $660. For 2026, it rises to $680. Whatever the 2027 limit ends up being, expect the carryover cap to be roughly 20% of that number.

●Grace period: Instead of a carryover, an employer can give employees an extra 2.5 months (75 days) after the plan year ends to spend down remaining funds, per IRS Notice 2005-42. There's no dollar cap on a grace period, but there's no rollover into the following plan year's new election either, it just extends the deadline to spend what's already there.

●Neither: Some plans stick with the strict use-it-or-lose-it rule, meaning any unspent money is forfeited when the plan year ends.

You have to check your own employer's plan document to know which one applies to you, since the IRS sets the outer limits but doesn't require employers to offer either option. If you're not sure, ask HR or your plan administrator directly, this is a detail worth confirming before you lock in a big election amount.

Dependent Care FSA vs Healthcare FSA: What's the Difference?

People often assume these two accounts work the same way. They don't, and the differences matter when you're deciding how much to contribute.

●Healthcare FSA limit: Set annually by the IRS and adjusted for inflation. It's $3,400 for 2026, and it's an individual limit, meaning each spouse who has access to their own FSA through their own employer can contribute up to the limit separately.

●Dependent Care FSA limit: This one is set by statute under IRC Section 129, not inflation-adjusted, and it's a household limit. It's been $5,000 per year for married couples filing jointly or single head-of-household filers, and $2,500 for married couples filing separately, largely unchanged for decades (see IRS Publication 503). Unlike the healthcare FSA, this limit doesn't move just because the IRS updates inflation figures each fall, it takes an act of Congress to change it.

●Eligible expenses: A Healthcare FSA covers medical, dental, and vision costs. A Dependent Care FSA only covers care that allows you (and your spouse, if married) to work or look for work, like daycare, before- and after-school programs, or care for an adult dependent who can't care for themselves.

●Carryover rules: The carryover option applies to Healthcare FSAs. Dependent Care FSAs generally don't get the same carryover treatment; some employers offer a grace period instead, but check your specific plan.

Because these are two completely separate accounts with separate limits and separate rules, you can contribute to both in the same year if your employer offers both and you have eligible expenses for each.

What Can You Actually Buy With FSA Money?

The IRS defines eligible expenses under Section 213(d) of the tax code, and the list is broader than most people realize. For a Healthcare FSA, common eligible expenses include:

●Copays, coinsurance, and deductibles for medical, dental, and vision care

●Prescription medications and many over-the-counter drugs (thanks to the CARES Act, OTC meds no longer require a prescription to qualify)

●Menstrual care products, which became eligible under the same CARES Act change

●Contact lenses, glasses, and LASIK surgery

●Physical therapy, chiropractic care, and acupuncture

●Mental health counseling and therapy copays

●Certain home medical equipment, like crutches or blood pressure monitors

Things that generally don't qualify: cosmetic procedures, general wellness items like gym memberships (unless prescribed for a specific condition), and most vitamins or supplements taken for general health. When in doubt, check your plan administrator's eligible expense list or IRS Publication 969, since some items need a Letter of Medical Necessity from your doctor to qualify.

How Do You Enroll or Change Your FSA Election?

FSA elections aren't something you can change on a whim mid-year, so it's worth getting the amount right during open enrollment. Here's the general process:

1.Review your spending from the past year. Look at what you actually spent on copays, prescriptions, dental work, or dependent care. Past spending is the best predictor of next year's costs.

2.Check the current contribution limits for both the Healthcare FSA and Dependent Care FSA before you set your amount, so you don't accidentally try to elect more than allowed.

3.Log into your employer's benefits portal or your third-party administrator's platform during the open enrollment window, usually a few weeks in the fall for plans starting January 1.

4.Enter your election amount and confirm which account type you're funding, Healthcare, Dependent Care, or Limited Purpose.

5.Save your confirmation and check your first few paychecks to make sure the deduction matches what you elected.

Outside of open enrollment, you generally can't change your election unless you have a qualifying life event, like marriage, divorce, a new baby, or a change in employment status. That's a stricter rule than most people expect, and it's another reason to think carefully about your number before you submit it.

If your company works with a third-party administrator like CafeHealth to run FSA enrollment and claims, that platform is usually where you'll make your election, track your balance, and submit reimbursement claims throughout the year. You can see how that setup works on our FSA administration page.

What Happens If You Change Jobs or Have Multiple FSAs Mid-Year?

This one catches people off guard. If you leave a job partway through the plan year, your FSA typically ends on your last day of employment, unless your employer offers COBRA continuation for the FSA (which is only available in limited circumstances and usually only makes sense if you've already contributed more than you've spent). Any unused funds beyond what continuation covers are generally forfeited, so it's smart to spend down your balance before you know you're leaving, if you have advance notice.

If you switch jobs and your new employer also offers an FSA, you get a fresh election and a fresh limit at the new job, the IRS limit applies per employer, not per person, in the same way as some other benefit limits. That means in a job-change year, it's technically possible to have contributed to two separate FSAs at two different employers, each up to that year's individual limit. It's an edge case, but worth knowing if you're mid-transition around open enrollment season.

Why Should HR Teams Get Ahead of the 2027 Limit Now?

If you're the one running benefits for your company, waiting until the IRS Revenue Procedure drops in fall 2026 to start your 2027 open enrollment prep puts you behind. Enrollment materials, payroll system updates, and employee communications usually need to go out weeks before the plan year starts, and for calendar-year plans that means work has to begin well before the official number is confirmed.

A few things worth doing now, regardless of what the exact 2027 number turns out to be:

●Build your enrollment communications using the current confirmed limit ($3,400 for 2026) with a note that the number will be finalized once the IRS releases its annual update.

●Confirm with your TPA how quickly they can update system limits once the new figure is announced, so there's no lag between the IRS release and your enrollment platform reflecting it.

●Review your plan document to confirm whether you're offering a carryover or grace period, and make sure that choice is clearly communicated to employees before they set their 2027 election.

●Audit your eligible expense list annually, since IRS guidance on things like OTC drugs and telehealth costs has shifted a few times in recent years.

Getting these pieces in place early means when the actual 2027 limit does get announced, you're just updating one number, not rebuilding your whole enrollment process from scratch.

Once you're ready to talk through your specific plan setup, timing, or how a TPA can take this off your plate, grab time on Shannon's calendar for a free consultation. She'll walk through your current FSA setup, what's changing for 2027, and whether your enrollment process needs any adjustments before the next open enrollment window opens.

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Quick Questions People Ask About the 2027 FSA Limit

What is the FSA contribution limit for 2027?

The IRS hasn't announced it yet. That release usually comes in the fall of the year before, so expect the official 2027 number sometime around October or November 2026. Based on recent year-over-year increases, a reasonable working estimate is somewhere between $3,400 and $3,600, but that's a projection based on past trends, not a confirmed figure.

How much can I contribute to my FSA in 2027?

Until the IRS publishes the official 2027 Revenue Procedure, the most recent confirmed number is the 2026 healthcare FSA limit of $3,400. Your employer's plan can set a lower cap than the IRS maximum if they choose, so always double check your specific plan document during open enrollment rather than assuming you automatically get the full IRS limit.

Can I roll over unused FSA funds to the next year?

Only if your employer's plan allows a carryover. The IRS caps the carryover amount at roughly 20% of that year's contribution limit, which worked out to $660 for 2025 and $680 Book a free chat with Shannon.