FSA Election Calculator: How Much to Put in a Health FSA

Each extra dollar is a small bet

Money you put in a health FSA comes out of your paycheck before federal income tax, state income tax and the 7.65% employee FICA (IRC §125). In the 22% bracket with a 5% state tax, every elected dollar saves about 35 cents. But a dollar you don’t spend by the plan’s deadline is gone, all of it.

So the last dollar you elect wins 35 cents if you end up spending it and loses a dollar if you don’t. It’s worth electing while the chance of not spending it is below 35%. That makes the best election the amount of spending you’re 65% sure to reach. Operations researchers call this the newsvendor rule, after the paper seller deciding how many copies to stock.

We ran a household that expects at least $600, most likely $1,500 and at most $3,000 of eligible spending, at a 34.65% combined rate, through the calculator with no carryover:

Two things stand out. The best election still has a 35% chance of leaving money behind, and that’s fine: the tax saved on the dollars you do spend pays for it. And the curve is flat near the top, so electing your most likely spending ($1,500 here) costs only about a dollar compared with the exact best. Overshooting is what hurts: the full $3,400 loses $522 on average.

Carryover and grace period change the answer

A plan may let you roll up to $680 of unused 2026 money into 2027, or give you a grace period through March 15 to spend it, but not both (IRS Notice 2013-71). With a carryover, money that rolls over isn’t lost, so the best election moves up by the full carryover: $2,145 in the example, with expected net savings of $643. With a grace period, the extra 2½ months of spending stretch it to about $1,770.

How the math works

• Combined rate: t = federal bracket + state rate + 7.65% (drop the 7.65% above the Social Security wage base)
• Forfeit: max(election − spending − carryover, 0)
• Net: t × election − forfeit, averaged over a triangle from your low to your high estimate
• Best election: the t-th percentile of spending, plus the carryover, capped at the plan limit

The 2026 limit ($3,400) and carryover ($680) come from IRS Rev. Proc. 2025-32. The IRS hadn’t published the 2027 health FSA figures as of October 31, 2026; it usually does in the fall inflation release, so check your enrollment materials and adjust the limit under “Plan limits”.

Math runs locally. Inputs never leave your browser. Source on github.

Where this doesn’t apply

• You have an HSA-eligible plan. A general-purpose health FSA makes you ineligible to contribute to an HSA. A limited-purpose FSA (dental and vision only) doesn’t; use your dental and vision estimates only.
• Dependent care FSA. Different rules and a $7,500 household limit starting in 2026; the forfeit math is similar but expenses are usually predictable.
• You might leave the job. The uniform coverage rule makes your full election available on January 1, which helps if a big bill comes early, but unspent money is generally lost when employment ends unless you elect COBRA for the FSA.
• Very predictable expenses. If the low and high estimates are close (a monthly prescription, scheduled orthodontics), just elect that amount.
• Your state taxes FSA contributions. Set the state rate to 0.

What to actually do

1. Pull last year’s eligible spending from your FSA or insurer statements; that’s a good “most likely.”
2. Write down what’s nearly certain next year (prescriptions, planned dental work, glasses) as the low estimate, and a bad-year number as the high.
3. Enter them with your bracket and your plan’s carryover or grace period, and elect roughly the “best” amount.
4. If you’re torn, err low: being $500 under the best costs less than being $500 over.
5. Comparing with an HSA instead? The HSA Optimizer shows when the triple tax break wins.