What types of accounts does this apply to?

This calculator is designed for pre-tax medical or flex savings accounts, such as employer-sponsored healthcare FSAs and HSA-style accounts. Exact tax treatment varies by account type and plan design, so always confirm details in your plan documents.

Do all contributions avoid both income and payroll taxes?

No. Many employer plans reduce both income and payroll taxes, but some only reduce income tax. If your contributions do not avoid payroll tax, set the payroll tax rate input to 0% and interpret results accordingly.

Are contribution limits and use-it-or-lose-it rules included?

No. The calculator focuses on tax savings given the contribution you enter. It does not enforce annual caps or model FSA forfeiture or HSA rollover rules. Always check IRS limits and your plan’s specific rules before choosing a contribution amount.

Does this account for investment growth inside an HSA?

No. Potential investment growth inside an HSA can add significant long-term benefits, but that depends on your investment choices and time horizon. This tool focuses on the immediate tax savings from contributions.

finance calculator

Medical/Flex Savings Account Calculator

Estimate tax savings from contributing pre-tax dollars to a medical or flexible savings account (FSA/HSA-like) using your marginal and payroll tax rates.

Results

Income tax savings: $660
Payroll tax savings: $230
Total tax savings: $890

How to use this calculator

Enter the annual pre-tax contribution you expect to make to your medical or flex savings account.
Enter your marginal income tax rate (federal only or combined federal + state if you want a blended rate) and your payroll tax rate if contributions also avoid payroll tax in your plan.
Specify how many years you expect to continue contributing roughly this amount.
Review the resulting income tax savings, payroll tax savings, and total tax savings for one year and across the entire multi-year period.
Adjust contribution amount, tax rates, or years to see how they change your estimated tax benefit.

Inputs explained

Annual contribution: The amount you plan to contribute each year to your medical or flex savings account on a pre-tax basis. This might be a healthcare FSA election through your employer or an HSA contribution.
Marginal income tax rate (%): Your marginal tax rate on the next dollar of income. You can use just your federal rate or add your state rate if you want to approximate combined income tax savings.
Payroll tax rate (%): The payroll tax rate applied to your wages (often 7.65% for Social Security and Medicare combined for employees). Some employer-sponsored accounts reduce payroll tax as well as income tax; others only affect income tax. Check your plan and set this to 0% if payroll taxes are not reduced.
Years contributing: How many years you expect to make roughly this same annual contribution. The calculator multiplies one-year tax savings by this number to give a simple cumulative estimate.

How it works

Qualifying pre-tax contributions reduce your taxable wages for income tax purposes, and in many employer plans they also reduce payroll taxes.

We treat your annual contribution as a reduction to taxable wages and multiply it by your marginal income tax rate to estimate income tax savings.

We also multiply the same contribution by your payroll tax rate (for example, 7.65% for Social Security and Medicare) to estimate payroll tax savings when applicable.

Total annual tax savings = income tax savings + payroll tax savings.

If you expect to make the same contribution for multiple years, we multiply each annual savings amount by the number of years you enter to show a simple cumulative savings estimate (without investment growth).

Formula

We use a simple linear model:\n\n1. Income tax savings (per year) = Annual contribution × (Marginal income tax rate ÷ 100).\n2. Payroll tax savings (per year) = Annual contribution × (Payroll tax rate ÷ 100).\n3. Total tax savings (per year) = Income tax savings + Payroll tax savings.\n4. Multi-year totals = Each savings amount × Years contributing.

When to use it

Estimating the tax benefit of contributing to a healthcare FSA or HSA-style account through your employer.
Comparing the tax savings from contributing more or less to a medical savings account versus taking the same dollars as taxable pay.
Explaining to a spouse, partner, or client how pre-tax contributions reduce both income and (in some cases) payroll taxes.
Projecting multi-year tax savings if you consistently fund a medical savings account while you have qualifying coverage.

Tips & cautions

Check your plan documents to confirm whether contributions reduce both income and payroll taxes or only income tax; if they don’t affect payroll taxes, set the payroll tax rate to 0%.
Be mindful of annual FSA and HSA contribution limits; this calculator does not enforce caps or model forfeiture rules for unused FSA balances.
If your marginal tax rate changes over time—for example, due to income increases—you may want to rerun the calculator with updated rates instead of relying on a single multi-year projection.
Remember that HSAs may offer additional long-term benefits such as tax-deferred growth and tax-free withdrawals for qualified medical expenses—those investment effects are not modeled here.
Uses fixed marginal income and payroll tax rates; it does not model bracket changes, phaseouts, or other tax interactions.
Does not enforce IRS contribution limits, model employer contributions, or incorporate plan-specific rules like FSA carryovers or grace periods.
Ignores investment growth inside HSAs or other accounts; it focuses purely on upfront tax savings from contributions.
Multi-year totals are simple multiples of one-year savings and do not reflect changes in tax law, income, or account behavior over time.

Worked examples

Example 1: $3,000 contribution, 22% income tax, 7.65% payroll tax

Annual contribution = $3,000; marginal income tax rate = 22%; payroll tax rate = 7.65%; years = 1.
Income tax savings = 3,000 × 0.22 = $660.
Payroll tax savings = 3,000 × 0.0765 = $229.50.
Total tax savings ≈ $660 + $229.50 = $889.50 for that year.

Example 2: Income tax savings only

Annual contribution = $2,000; marginal income tax rate = 24%; payroll tax rate = 0%; years = 1.
Income tax savings = 2,000 × 0.24 = $480.
Payroll tax savings = 0 because contributions do not avoid payroll tax in this scenario.
Total tax savings = $480 for that year.

Example 3: Five-year projection

Annual contribution = $2,500; marginal income tax rate = 22%; payroll tax rate = 7.65%; years = 5.
Income tax savings per year = 2,500 × 0.22 = $550; over 5 years ≈ $2,750.
Payroll tax savings per year = 2,500 × 0.0765 ≈ $191.25; over 5 years ≈ $956.25.
Total tax savings over 5 years ≈ $2,750 + $956.25 = $3,706.25 (ignoring changes in tax law or income).

Deep dive

Use this medical/flex savings account calculator to estimate how much income and payroll tax you could save by contributing pre-tax dollars to an FSA- or HSA-style account.

Enter your annual contribution, marginal income tax rate, payroll tax rate, and years contributing to see estimated tax savings for one year and across multiple years.

Ideal for employees deciding how much to put into healthcare FSAs or HSAs and wanting a quick sense of the tax impact of those contributions.

FAQs

What types of accounts does this apply to?: This calculator is designed for pre-tax medical or flex savings accounts, such as employer-sponsored healthcare FSAs and HSA-style accounts. Exact tax treatment varies by account type and plan design, so always confirm details in your plan documents.
Do all contributions avoid both income and payroll taxes?: No. Many employer plans reduce both income and payroll taxes, but some only reduce income tax. If your contributions do not avoid payroll tax, set the payroll tax rate input to 0% and interpret results accordingly.
Are contribution limits and use-it-or-lose-it rules included?: No. The calculator focuses on tax savings given the contribution you enter. It does not enforce annual caps or model FSA forfeiture or HSA rollover rules. Always check IRS limits and your plan’s specific rules before choosing a contribution amount.
Does this account for investment growth inside an HSA?: No. Potential investment growth inside an HSA can add significant long-term benefits, but that depends on your investment choices and time horizon. This tool focuses on the immediate tax savings from contributions.

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This medical/flex savings account calculator provides simplified estimates of potential income and payroll tax savings from pre-tax contributions. It does not capture all tax rules, contribution limits, plan-specific provisions, or future changes in law and is not tax, legal, or financial advice. Always review your plan documents and consult a qualified tax professional before making contribution decisions based on these estimates.