Transparent method
The formula
Worked example
Example inputs
How to interpret the result
An FSA's tax savings come with a real trade most retirement accounts don't carry, unused funds are generally forfeited at year-end or a short grace period rather than carrying forward indefinitely, so the same contribution that saves tax dollars can become a loss if healthcare or dependent-care spending comes in below what was actually elected.
Before you rely on it
What to check
Estimate the coming year's eligible expenses conservatively before electing an FSA contribution amount, since overestimating risks forfeiting unused funds under the plan's specific rollover or grace-period rules.
The common error
Where people go wrong with FSA tax savings calculator
Electing an FSA contribution based on an optimistic estimate of future healthcare or dependent-care spending. Underspending against that election risks forfeiting the unused portion, since FSA funds don't carry over indefinitely the way most retirement accounts do.
Sensitivity evidence
How annual HSA or FSA contribution changes the estimated tax savings
| Annual HSA or FSA contribution | Estimated tax savings | Estimated net contribution cost |
|---|---|---|
| $2,560 | $938 | $1,622 |
| $2,880 | $1,056 | $1,824 |
| $3,200worked example | $1,173 | $2,027 |
| $3,520 | $1,290 | $2,230 |
| $3,840 | $1,407 | $2,433 |
Every input, tested
Which input moves the estimated tax savings most
| Input | Tested from | To | Estimated tax savings at each end | Swing |
|---|---|---|---|---|
| Annual HSA or FSA contribution | $2,880 | $3,520 | $1,056 to $1,290 | $235 (20%) |
| Federal marginal rate | 22.0% | 26.0% | $1,109 to $1,237 | $128 (11%) |
| State marginal rate | 4.0% | 6.0% | $1,141 to $1,205 | $64 (5.5%) |
| Payroll tax avoided | 6.7% | 8.7% | $1,141 to $1,205 | $64 (5.5%) |
Two variables at once
Estimated tax savings by annual HSA or FSA contribution and federal marginal rate
| Annual HSA or FSA contribution \ Federal marginal rate | 20.0% | 24.0% | 28.0% |
|---|---|---|---|
| $2,560 | $836 | $938 | $1,041 |
| $2,880 | $940 | $1,056 | $1,171 |
| $3,200 | $1,045 | $1,173 | $1,301 |
| $3,520 | $1,149 | $1,290 | $1,431 |
| $3,840 | $1,254 | $1,407 | $1,561 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Annual HSA or FSA contribution | $3,200 |
| Federal marginal rate | 24.0% |
| State marginal rate | 5.0% |
| Payroll tax avoided | 7.7% |
| Estimated tax savings | $1,173 |
| Estimated net contribution cost | $2,027 |
Where the inputs come from
Annual FSA election is the amount you choose to set aside during open enrollment, up to an annual limit set by the IRS. Federal and state marginal rates and the payroll tax avoided determine the savings, since FSA contributions are exempt from income and payroll taxes. Estimate your likely medical, dental and vision spending carefully: FSA money is generally use-it-or-lose-it, though some plans allow a limited carryover or a grace period.
Using the estimated tax savings in a real decision
A dependent care FSA has a separate limit for childcare costs.
When the result stops applying
Elections are locked in for the plan year unless you have a qualifying life event, and unused funds beyond the carryover limit are lost. Employers set the plan rules, so read your summary plan description. If you have a high-deductible health plan, a general-purpose FSA usually cannot be combined with an HSA, though a limited-purpose FSA can.
What to compare it with
Compare with the HSA tax savings calculator, and estimate your medical spending with the health insurance plan comparison page. The take-home pay calculator shows how the deduction changes each paycheck. Plan purchases near the end of the year to use any balance.
People also ask
Frequently asked questions
What happens to unused FSA money?
Generally it is forfeited at the end of the plan year, though plans may allow a small carryover or a short grace period to use it.
What can I spend FSA money on?
Qualified medical expenses such as copays, deductibles, prescriptions, dental and vision care, and some over-the-counter items.
Can I have an FSA and an HSA?
Generally not a general-purpose FSA with an HSA, though a limited-purpose FSA for dental and vision can be paired with one.