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Tax year 2026Checked

Health FSA and dependent care FSA on OPT or H-1B: what you lose if you leave your job

How a health FSA and a dependent care FSA work for OPT, STEM OPT and H-1B workers in 2027: the limits, what happens after a layoff, the HSA conflict, and why an H-4 or F-2 spouse usually blocks the dependent care FSA.

$3,500 the most you can put in a health FSA for plan years starting in 2027

By F1TaxReturn Tax Team. Published . Facts checked against the sources below on . 10 minute read.

In short

  1. For plan years starting in 2027 a health FSA can take up to $3,500 from your pay, free of federal income tax and Social Security and Medicare tax, and a plan may carry up to $700 into the next year.
  2. Your whole health FSA election is available from the first day of the plan year, but the IRS has said a health FSA generally cannot pay for care after your job ends unless you continue it under COBRA.
  3. A general-purpose health FSA stops you from putting money in an HSA; a limited-purpose FSA, which pays for dental, vision and preventive care, does not.
  4. The dependent care FSA limit is $7,500 from 2026 ($3,750 married filing separately), but a married worker's tax-free amount cannot exceed the lower of the two spouses' earned income, so an H-4 spouse without work or an F-2 spouse usually brings it to $0.
  5. To exclude dependent care FSA money shown in W-2 box 10, you complete Part III of Form 2441; taxable benefits go on Form 1040-NR line 1e (2025 and 2026 draft forms).
Contents, 9 sections

A health FSA lets you pay medical costs with pre-tax pay, up to $3,500 for plan years starting in 2027. The whole amount is yours to claim from the first day. If your job ends partway through the year, care you receive after your FSA coverage ends is generally not covered unless you continue the FSA under COBRA.

A dependent care FSA takes up to $7,500 a year for child care, but for a married worker it is capped by the lower-earning spouse's earned income. An H-4 spouse without work authorization, or an F-2 spouse, usually brings that cap to $0.

For your tax return as a whole, start with the guide to US taxes for international students.

How does a health FSA work in 2027?

For plan years starting in 2027 you can set aside up to $3,500 of salary in a health FSA, up from $3,400 for 2026 (Revenue Procedure 2026-35). That money is free of federal income tax and of Social Security and Medicare tax (FICA) (Publication 969).

You choose the amount at the start of the plan year, and your employer takes it from each paycheck. Four rules matter most:

  1. The full election is available on day one, "regardless of the amount you have actually contributed" (Pub 969).
  2. Money is use-it-or-lose-it. A plan may let you carry up to $700 of unused 2027 money into 2028, or give a grace period of up to 2 1/2 months. It cannot offer both, and it may offer neither.
  3. It pays medical costs, not insurance. Over-the-counter medicine counts, but Pub 969 lists "health insurance premiums" among the costs an FSA cannot pay.
  4. The election generally holds all year. It can change only after an event the cafeteria plan rules list, such as marriage or a birth, if your plan allows it.

A nonresident alien student on OPT generally pays no FICA, so a health FSA saves them income tax only. At $100,000 of pay in Texas and 2026 rates, both workers below are in the 22% bracket.

Estimate at 2026 federal rates (2027 brackets are not yet published), single, a full year of wages in Texas.
Worker Income tax saved FICA saved Total
OPT, nonresident, no FICA $3,500 x 22% = $770 $0 $770
H-1B, resident all year $3,500 x 22% = $770 $3,500 x 7.65% = $267.75 $1,037.75

If you become a resident alien in your sixth year during 2027, your pay owes FICA from your residency starting date, and the H-1B row is closer to your case. The pre-tax benefits comparison works other salaries, and the take-home calculator models your own pay.

Key facts

Health FSA limit, 2027 plan year
$3,500 ($3,400 for 2026)
Health FSA carryover, if the plan allows
Up to $700 into 2028, or a grace period of up to 2 1/2 months, not both
Dependent care FSA limit, 2026 and 2027
$7,500 ($3,750 married filing separately)
Care after your job ends
Generally not paid by a health FSA unless you elect COBRA for it
H-1B grace period after a job ends
Up to 60 consecutive days, once per validity period, and DHS may shorten it (8 CFR 214.1(l)(2))
OPT unemployment limit
90 days in total, or 150 days with the STEM extension
For
F-1 workers on OPT or STEM OPT and H-1B workers choosing a health FSA or a dependent care FSA at open enrollment for the 2027 plan year, and their H-4 or F-2 spouses.
Not for
Anyone looking for advice on which plan or amount to choose, and anyone asking about immigration status after a layoff, which is a question for an immigration attorney or your school's DSO.

What happens to your health FSA if you lose your job or leave the US?

Care you receive after your FSA coverage ends with your job is generally not covered, unless you continue the FSA under COBRA.

The IRS has said a health FSA generally may not pay for care an employee gets after they stop participating, such as after "termination of employment" (Information Letter 2016-0050). Your plan document says the day your coverage ends.

Care before that day is different. In the case the letter answered, the IRS said a timely claim must be paid "up to the amount elected for the year". The plan could not limit it to what came out of pay.

A plan may set "a deadline for submitting a claim", so ask HR for yours before you leave.

Worked example: Kiran, H-1B, a $2,000 health FSA and a layoff in March 2027

Kiran (an illustrative name) elects a $2,000 health FSA for the 2027 calendar-year plan, taken in 12 equal monthly amounts. Kiran's last day of work, and the last day of FSA coverage under the plan, is March 31, 2027.

Step Amount
Paid in by March 31: $2,000 x 3 / 12 $500
Dental bill in March, claimed on time and paid in full $1,200
Paid out above what Kiran paid in: $1,200 minus $500 $700
Glasses bought in May, after the last day $300, not paid
Election left that cannot pay for care after March 31: $2,000 minus $1,200 $800

If Kiran had no care before March 31, the $500 paid in would generally be lost. The May glasses would be covered only if Kiran elected COBRA for the FSA.

A $2,000 health FSA month by month: all $2,000 can be claimed from January 1, and $500 is paid in by March 31, the last day of work. A $1,200 dental bill in March, claimed on time, is paid; $300 glasses in May are not, unless COBRA is elected.Kiran's 2027 health FSA, month by month. Kiran elects $2,000 for the 2027 calendar-year plan, and the full $2,000 can be claimed from January 1. Money comes out of pay in equal monthly amounts, so $500 is paid in by March 31, Kiran's last day of work and of FSA coverage. After that no more is paid in. A $1,200 dental bill in March, claimed on time, is paid in full. $300 of glasses bought in May are not paid, because care after March 31 is not covered unless Kiran elects COBRA for the FSA.A $2,000 health FSA and a layoff on March 31Kiran's example, 2027 calendar-year planAvailable to claim$2,000from Jan 1Care after March 31: not coveredunless you elect COBRAPaid in from your pay$500No pay, so nothing more paid inJanFebMarAprMayJunJulAugSepOctNovDecLast day of work: March 31March$1,200 dental billClaimed on time: paid in fullMay$300 glassesNot paid without COBRAA $2,000 health FSA month by month: all $2,000 can be claimed from January 1, and $500 is paid in by March 31, the last day of work. A $1,200 dental bill in March, claimed on time, is paid; $300 glasses in May are not, unless COBRA is elected.Kiran's 2027 health FSA, month by month. Kiran elects $2,000 for the 2027 calendar-year plan, and the full $2,000 can be claimed from January 1. Money comes out of pay in equal monthly amounts, so $500 is paid in by March 31, Kiran's last day of work and of FSA coverage. After that no more is paid in. A $1,200 dental bill in March, claimed on time, is paid in full. $300 of glasses bought in May are not paid, because care after March 31 is not covered unless Kiran elects COBRA for the FSA.A $2,000 health FSA anda layoff on March 31Kiran's example, 2027 planAvailable to claim from Jan 1$2,000Care after March 31:not covered unless COBRAPaid in from your pay$500Nothing more paid inJFMAMJJASONDLast day: March 31March: $1,200 dental billClaimed on time: paid in fullMay: $300 glassesNot paid without COBRA
The whole $2,000 is usable from January, but nothing after the last day unless you elect COBRA.

Your plan's COBRA notice says if the FSA can be continued and at what cost. The Department of Labor's COBRA guide says a plan must give you at least 60 days to elect COBRA.

Two immigration clocks may run at the same time; neither changes the FSA rule:

Visa Clock after the job ends Source
H-1B Up to 60 consecutive days in status (less if the validity period ends first), once per validity period; DHS may shorten it; no work in that time unless otherwise authorized 8 CFR 214.1(l)(2)
F-1 on OPT At most 90 days of unemployment in total, or 150 over the whole OPT period with the STEM extension 8 CFR 214.2(f)(10)(ii)(E)

Ask an immigration attorney about your status, and your DSO what counts as a day of unemployment. If your OPT or your H-1B job could end during 2027, only care you receive before then can use the money you elect.

Can you have a health FSA and an HSA at the same time?

Not a general-purpose one. Pub 969 says an employee covered by a high-deductible plan "and a health FSA ... can't generally make contributions to an HSA."

A limited-purpose FSA is allowed beside an HSA. Pub 969 says it can pay for dental care, vision care and preventive care, among other listed items.

Moving from an FSA in 2026 to an HSA in 2027? A general-purpose FSA's grace period running into 2027 counts as other coverage, which blocks HSA contributions for those months. It does not if your 2026 FSA balance is zero at the end of the 2026 plan year (Pub 969).

A carryover into a general-purpose FSA raises the same question; ask your plan how it handles it.

Other differences:

Feature Health FSA HSA
2027 limit $3,500 $4,500 self-only, $9,000 family
Unspent money Lost, except a carryover of up to $700 or a grace period Stays yours, even after you leave the US
Available before you pay in Yes, the whole election No, only what is in the account
Pays COBRA premiums No Yes
Change the amount mid-year Only after a listed event Generally at any time, for future pay

The HSA guide for H-1B and OPT covers the rest, and the HDHP and PPO comparison covers the plan an HSA needs.

Can you use a dependent care FSA with an H-4 or F-2 spouse?

Usually not, if your spouse has no earned income: for a married worker, the tax-free amount cannot exceed the lower of the two spouses' earned income (IRC 129). The limit is $7,500 a year from 2026, or $3,750 for a married person filing separately, and it is not indexed.

An H-4 spouse without work authorization, and an F-2 spouse, have no earned income from work. The immigration rules say H-4 status gives no work authorization by itself, and that an F-2 spouse "may not accept employment" (8 CFR 214.2).

Publication 503 makes one exception, for a spouse who is a full-time student or not able to care for themselves. That spouse counts as earning $250 for each such month with one qualifying person, or $500 with two or more. To be a full-time student, they must be enrolled full-time for some part of each of 5 calendar months in the year.

Your spouse in 2027 Earned income for the cap
H-4 with an EAD, working Their actual earnings
H-4 without an EAD, not studying $0, so no tax-free dependent care money
A full-time student (at least 5 months of the year) $250 for each month as a student (one qualifying person) or $500 (two or more)
F-2, not studying $0
F-2, studying avocationally Not settled: ask a tax preparer

For example, with one child and a spouse who is a full-time student for 9 months and has no pay, the cap is 9 x $250 = $2,250 for the year.

Three more points before you enroll:

  1. Married nonresidents usually face $3,750, the limit on a separate return. A married nonresident alien files Form 1040-NR as married filing separately. An H-1B resident with a nonresident spouse files jointly only if the couple chooses to treat that spouse as a resident (Pub 519).
  2. The care must be for a qualifying person, usually your child under 13 (Pub 503). If you are a nonresident alien, ask a tax preparer whether your child counts before you enroll.
  3. Most plans pay only what you have paid in so far. The day-one rule above is a health FSA rule; check your dependent care plan's own terms with HR.

If your H-4 spouse gets an EAD and starts work in 2027, your plan may allow a change; ask HR. The open enrollment checklist covers the other 2027 choices.

Watch out

Dependent care FSA money appears in W-2 box 10. Pub 503 says "To claim the exclusion, you must complete Part III of Form 2441." Any taxable part goes on Form 1040-NR line 1e (2025 form and 2026 draft). F1TaxReturn does not prepare Form 2441.

Can you claim the child and dependent care credit instead?

Only in narrow cases if you are a married nonresident alien. Pub 519 says you can claim it "only if" you choose a joint return with a US citizen or resident spouse, or qualify as certain married people living apart.

Your expenses for the credit also cannot exceed your US earned income. A married resident, such as an H-1B worker, generally must file a joint return to claim it (Pub 503).

From 2026 the credit is 50% of up to $3,000 of expenses for one qualifying person, or $6,000 for two or more (IRC 21). The rate drops 1 point for each $2,000 of AGI (or part of $2,000) over $15,000, down to 35%. It then drops 1 point for each $2,000 ($4,000 joint) over $75,000 ($150,000 joint), down to 20%.

Dependent care FSA money you exclude comes off the $3,000 or $6,000 first (Pub 503). With $3,000 or more through the FSA for one qualifying person, or $6,000 or more for two, no expenses are left for the credit.

A nonresident whose spouse is also a nonresident, such as an F-1 worker with an F-2 spouse, cannot file jointly. The F-2 and J-2 dependents guide covers the family's other forms.

Do states tax FSA money?

New Jersey and Pennsylvania differ from the federal rules; other states were not checked. New Jersey "does not adopt the federal income tax treatment of cafeteria plans", and its example taxes a full salary despite a health FSA (TB-39(R)).

Pennsylvania says payments "for other benefits, including dependent care" are not excludable from its taxable pay (PA Personal Income Tax Guide). We found no rule on New Jersey's treatment of a dependent care FSA or Pennsylvania's of a health FSA; ask payroll.

What to do next

  1. Find your plan's 2027 open enrollment window. Check if its health FSA has a carryover (up to $700) or a grace period.
  2. List the medical costs you expect before your job or stay could end in 2027, and compare it with the amount you elect.
  3. If you choose an HSA for 2027, remember that only a limited-purpose FSA fits beside it. If your 2026 FSA has a grace period, check that its balance will be zero at the end of the 2026 plan year; if it has a carryover, ask how the plan treats it.
  4. If you are married, check your spouse's 2027 earned income before electing a dependent care FSA.
  5. If you leave a job, ask HR the claim deadline and the day your coverage ends, and send claims for all care before then.
  6. If your 2026 W-2 has an amount in box 10, attach Form 2441 to your 2026 return, due Thursday, April 15, 2027 for most workers with wages.

F1TaxReturn prepares Form 1040-NR and Form 8843 for free once the IRS publishes the final 2026 forms; you print, sign and mail them. It does not prepare Form 2441, Form 8889 for an HSA, a joint return, or an H-1B resident's Form 1040.

Leaving the US after H-1B? Read the guide to your last tax return.

Questions students ask

Can my health FSA refuse to pay more than I put in if I am laid off?

Not for care you received before your coverage ended, if you claim it on time. Publication 969 says the full amount you elected must be available at any time in the plan year, whatever you have paid in so far. In a 2016 information letter the IRS said a timely claim must be paid up to the amount elected, not limited to what came out of pay. Your plan document sets the claim deadline.

Can my health FSA pay my COBRA premiums after an H-1B layoff?

No. Publication 969 lists health insurance premiums among the expenses a health FSA cannot pay. An HSA can pay COBRA premiums, which is one difference between the two accounts.

Is a health FSA worth it on OPT if I pay no FICA?

It still lowers your federal income tax, though not Social Security and Medicare tax, which you do not owe while exempt. At $100,000 of pay in Texas and 2026 rates, a $3,500 health FSA saves an OPT worker $770 and an H-1B resident $1,037.75. Whether that outweighs the risk of losing unspent money is your decision.

My spouse is on H-4 without an EAD. Can I use a dependent care FSA?

Usually not. The tax-free amount cannot exceed the lower of your earned income and your spouse's, and an H-4 spouse without work authorization has none. The exception is a spouse who is a full-time student or cannot care for themselves, who counts as earning $250 a month with one qualifying person or $500 with two or more.

Does F1TaxReturn handle dependent care FSA money on my return?

No. F1TaxReturn prepares Form 1040-NR and Form 8843, but not Form 2441, which you need to exclude dependent care benefits shown in W-2 box 10. If your W-2 has an amount in box 10, use a preparer or software that handles Form 2441.

Sources

This guide is checked against these 16 documents, most recently on .

  1. Revenue Procedure 2026-35 (2027 health FSA limit and carryover), IRS
  2. Revenue Procedure 2025-32 (2026 health FSA limit, tax rates and standard deduction), IRS
  3. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans, IRS
  4. Information Letter 2016-0050 (health FSA after termination of employment), IRS
  5. Publication 15-B (2026), Employer's Tax Guide to Fringe Benefits, IRS
  6. Publication 503 (2025), Child and Dependent Care Expenses, IRS
  7. Publication 519 (2025), U.S. Tax Guide for Aliens, IRS
  8. Instructions for Form 1040-NR (2025), IRS
  9. 26 U.S.C. 129, Dependent care assistance programs, Cornell Law School LII
  10. 26 U.S.C. 21, Expenses for household and dependent care services, Cornell Law School LII
  11. 26 CFR 1.125-4, Permitted election changes, Cornell Law School LII
  12. 8 CFR 214.1, Requirements for admission, extension, and maintenance of status, Cornell Law School LII
  13. 8 CFR 214.2, Special requirements for admission, extension, and maintenance of status, Cornell Law School LII
  14. An Employee's Guide to Health Benefits Under COBRA, US Department of Labor
  15. TB-39(R), Cafeteria Plans, New Jersey Division of Taxation
  16. PA Personal Income Tax Guide, Gross Compensation, Pennsylvania Department of Revenue