Workplace Benefits
Limited Purpose Flexible Spending Account (LP-FSA) Guide
You may be familiar with flexible spending accounts (FSAs) — employer-sponsored accounts that can help you save money on healthcare expenses. But did you know an employer can offer different types of FSAs?
In addition to traditional FSAs — also referred to as healthcare FSAs — there are dependent care FSAs (DC-FSAs) and limited purpose FSAs (LP-FSAs). Dependent care FSAs help you pay for child care or adult-dependent-care services. Limited-purpose FSAs, on the other hand, are health-related FSAs that can be used for qualified dental and vision expenses. They are available to employees enrolled in a high-deductible health plan (HDHP) with a health savings account (HSA).
Read on to learn more about LP-FSAs, including who’s eligible, what’s covered, and how to use them.
What is a limited purpose FSA?
A limited purpose FSA is a tax-advantaged savings account that lets you set aside pre-tax money to pay for eligible dental and vision expenses. LP-FSAs can cover individuals, spouses, and eligible dependents.
Unlike a traditional FSA — which can help you pay for a variety of medical costs, including dental and vision — an LP-FSA is intended for just dental and vision care expenses. In some cases, you can use an LP-FSA to pay for post-deductible preventative medical expenses. This means once you’ve met your healthcare plan deductible, you may be able to use your LP-FSA to pay for qualified medical expenses.
How does a limited purpose FSA work?
An LP-FSA has the same contribution limits as a traditional FSA. For 2025, the contribution limit for an LP-FSA is $3,300, with a maximum of $6,600 per household or $3,300 for married couples filing separately.1 And just like a traditional FSA, the money you elect to contribute will be deducted from your paycheck tax-free.1 To figure out how much to contribute, consider what you can afford to have deducted from your paycheck and how much you anticipate having in covered expenses for the year.
Any unused funds in an LP-FSA may be forfeited at the end of the year.2 Check with your employer to see if they offer grace period — up to 2.5 months — or allow you to roll over unused funds up to a certain amount.2 In 2025, the maximum rollover amount that can be carried into 2026 is $660.1
Limited purpose FSA eligibility
To be eligible for an LP-FSA, you must be enrolled in an HDHP and have an HSA.3
Self-employed and retired individuals aren’t eligible for an LP-FSA, or any type of FSA, because these accounts are restricted to employees at a company that offers health insurance.3 However, these individuals can open an individual HSA — as long as they have an eligible HDHP.4
Limited purpose FSA-eligible expenses
LP-FSAs can be used to cover the costs of qualified dental and vision expenses. But what exactly can you use your FSA dollars on? The FSA store has a list of eligible vision and medical expenses, but here’s a sample:5
- Braces
- Contact lenses (when prescribed) and solution
- Dental services
- Dentures and bridges
- Diagnostic services
- Eye exams
- Eyeglasses (with a prescription)
- Fillings
- Laser eye surgery
- Office visits (dental and vision)
- Oral pain products
- Sunglasses (prescription)
- Teeth cleaning
- X-ray fees (dental)
For a more extensive list of eligible expenses, review Internal Revenue Service (IRS) Publication 502.6
Limited purpose FSA and HSA compatibility
You may have heard that you can’t have both an HSA and FSA. While IRS rules prevent people from having an HSA and a traditional FSA, those rules don’t apply to LP-FSAs. In fact, you actually need an HSA in order to have an LP-FSA.7
The choice to use both your HSA and your LP-FSA is up to you. Electing to use both accounts in tandem can help save you money each year.
How to maximize your LP-FSA and HSA dollars
One way to get the most out of both of your accounts is to use your LP-FSA on all your eligible dental and vision costs, and then save your HSA dollars for other medical expenses.
For example, say you have $4,000 in your HSA and $2,000 in your LP-FSA. You then are charged $1,000 for dental and vision expenses. If you use your HSA to pay for those expenses, you are left with only $3,000 in your HSA account. It might make more sense to save your HSA money for other medical expenses that an LP-FSA wouldn’t be able to pay for.
What’s more, HSAs roll over and stay with you if you leave your job. So it might also make sense to save your HSA money for future medical costs.8 For an LP-FSA, you typically need to use the money by the end of the plan year.
With that in mind, it’s important to understand that funds from an LP-FSA and HSA can’t be used to pay for the same eligible expense, otherwise known as “double-dipping.”9 You can’t get reimbursed twice for the same expense — you must decide which account you want to use for reimbursement.
Is a limited purpose FSA right for me?
If your employer offers an LP-FSA, enrolling in one can be an excellent option if you’re looking to reduce your dental and vision expenses while capitalizing on potential tax savings. If you’re already contributing to an HSA, starting an LP-FSA is a good way to maintain flexible HSA advantages without losing out on the benefits of an FSA.