An FSA is funded with pre-tax dollars. See the tax it saves on your health or care spending.
An FSA tax savings calculator shows how much a flexible spending account saves you by paying for health or dependent-care costs with pre-tax dollars.
An FSA lets you set aside money before income tax and payroll (FICA) tax to pay for eligible medical or dependent-care expenses. Because the contribution avoids both, your savings equal the contribution times your combined tax rate, often 30% or more. Spending you'd do anyway becomes noticeably cheaper.
The main risk is that FSAs are generally use-it-or-lose-it: money not spent by the plan year's end (or a short grace period) is forfeited. So the smart move is to contribute what you'll confidently spend on known costs, prescriptions, copays, dental, childcare, capturing the tax break without overfunding and losing money.
Your contribution times your combined income and FICA tax rate, often 30% or more, because FSA money avoids both taxes.
It's usually use-it-or-lose-it: unspent money at year-end (beyond a small grace period or carryover) is forfeited. Contribute what you'll actually spend.
A health FSA covers medical costs like copays, prescriptions, and dental; a dependent-care FSA covers childcare and eldercare. Eligible expenses vary.
See the exact formula and a worked example on our methodology page.