Health Care Flexible Savings Account for Military | DOD HCFSA

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The new Health Care Flexible Savings Account for US military families is not a move-the-needle type benefit. The DOD HCFSA is not worth your time or attention to set up.

The HCFSA costs far too much time, paperwork, and receipt tracking for the very little tax benefit you might receive. Military families are usually in very low tax brackets, so you probably will receive little or no tax benefit from this plan. I recommend your time and attention be spent on more valuable experiences and things.

Overview of the DOD HCFSA

Starting in March 2025, service members can opt into a new benefit- the Health Care Flexible Spending Account (HCFSA). Many other companies offer FSAs to their employees, but this is brand new for active duty service members as announced in the fall of 2024. It’s also different from the Dependent Care Flexible Spending Account (DCFSA) that was also new in 2024. 

FSAs are designed to be used on health care, over-the-counter medicine, medical supplies, and other eligible items each year. They have a very limited roll-over ability to the next calendar year, and they are very different from the popular Health Savings Account (HSA) that you may hear about as an investment option for those with high deductible health care. Tricare beneficiaries are NOT eligible for HSAs.

FSAs are SPENDING accounts. It allows you to use pre-tax money on approved health care expenses which then lowers your taxable income for the year. The HCFSA maximum contribution amount in 2025 is $3,200, and the minimum contribution is $100. Money is contributed via paycheck allotment from your LES; there is no more direct way to add money to your HCFSA. 

During open season enrollment, you have to estimate your eligible HCFSA expenses for the tax year carefully since you’re only able to rollover $640 to the next tax year. Anything above $640 will get forfeited as this is a “use it or lose it” benefit. 

The full amount you contribute for the year is available immediately though, meaning that if you have allotments set up to contribute $1,000 total throughout 2026, on January 1, 2026, you could be reimbursed $1,000 for eligible expenses even though you haven’t actually contributed the full $1,000 yet. 

The only benefit you get is a small tax deduction, but you have to enroll each year during a specific window, track expenses, and upload receipts. 

May not be worth the squeeze. Let’s run a couple scenarios to see.

HCFSA Tax Savings

If you’re in the 12% tax bracket, which is pretty realistic for average military members (but may be much lower especially with many servicemembers not paying state income tax either), and you use all $3,200 of this benefit properly, you would save $384 on your taxes. Not a big change to be honest.

Screen capture from fsafeds.gov

If you only have $1,500 of eligible expenses, you’d save $180 in taxes at a 12% tax bracket. This is probably not worth all the extra work.

Screen capture from fsafeds.gov

If you’re in a high tax bracket, it may be better. The 24% bracket with $3,200 contribution would save you $768 in taxes for the year. That’s pretty decent, especially if you use it on things you’d buy anyway such as braces for your child, massages, medical equipment for your family, or other eligible items. 

In that case, if you spent 1 hour a month submitting receipts to your HCFSA, in 12 months you’d be paying yourself an effective hourly rate of $64 per hour. That’s pretty decent. 

You can use this HCFSA calculator to check your specific situation.

Eligibility for Military HCFSA

Only active duty servicemembers and those on reserve component Active Guard or Reserve duty on Title 10 status are eligible for this HCFSA. Title 32 guardsmen, drill-status guardsmen, and traditional reservists are not eligible at this time. Government civilians have already had an HCFSA option through HCFSA feds previously. 

You must enroll during open season or after a qualifying life event. A qualifying life event as defined by the IRS includes change in marital status, birth or adoption of a child, death of a spouse or dependent, or change in employment status.

If married, the military HCFSA is not doubled. You only get one $3,200 benefit for the military HCFSA. Your spouse’s employer, if applicable, may offer a similar FSA benefit though; check with their HR department.

How to Use the Military HCFSA

After enrolling, purchase eligible items normally then submit your receipt via FSAfeds app. There is not a debit card or any way to pay directly. You pay for the item then submit for reimbursement. Also, you do have to re-enroll for the benefit again every year. 

When making purchases online, there is often an FSA eligible label or filter. This will help you find and verify eligibility of your purchase easily. 

Amazon.com screen capture

Possible Uses for Military HCFSA

If you have a known and predictable upcoming expense, it may be worth considering contributing to your HCFSA. For example, a child’s braces that will cost $3,000 during the year, or a couple who routinely spends $1,500 a year on massages. Depending on your tax bracket, you may be able to save a few hundred dollars on your taxes for scanning a few receipts after purchasing items you were going to get anyway.

Differences between military HSA, HCFSA, and DCFSA

This benefit is a flexible spending account, and as mentioned above, there is no real investment in this account. You have to use all of your FSA balance during the tax year except for a small amount ($640) you’re allowed to rollover as long as you re-enroll for the next tax year during open season.

The HSA is an investment account with great benefits for non-Tricare users with high-deductible insurance. Unfortunately, military service members are not eligible for HSAs.

The DCFSA is for dependent care, not healthcare but can affect your tax credits. You’ll have to see if the DCFSA and required paperwork is better than the easier tax credit. We discussed DCFSA with Brandon Lovingier, the Enlisted Money Guy™ on a recent podcast

Summary and Frequently Asked Questions

The DOD HCFSA benefit is pretty disappointing. It’s not going to help young servicemembers living paycheck to paycheck when they’re likely already in a very low tax bracket. Overall, it’s not a win for military families, although it may help some families save a few hundred dollars a year if they’re willing to do a little extra paperwork.

What is an eligible expense for the HCFSA for military families?

Everything from massages and acupuncture to braces to condoms to mattresses; there are a lot of options. And even more options are available with certain medical conditions with a doctor’s note. See full list on FSAfeds.gov

How much can I contribute to my HCFSA?

Military servicemembers can contribute up to $3,200 per year to their HCFSA. The minimum is $100.

How do I contribute to my military HCFSA?

Contributions are allowed only via payroll allotment on your LES.

Is the military HCFSA a good investment account?

No, it’s a spending account, not a health care savings account. The money must be used this year or you risk losing it. You can roll over only $640 to the next calendar year.

Is the military HCFSA use it or lose it?

Yes, except $640 can be rolled over. Anything you don’t use over that amount will be lost. 

What can military HCFSA be used for?

A lot of medical items, over the counter health and medical supplies, health care, vision, and dental not already covered by Tricare, massages, etc. See full list on FSAfeds.gov

How much can I save on taxes using HCFSA?

Not much, maybe a few hundred dollars per year.

How do I get refunded for an eligible expense?

You can submit a receipt via the FSAfeds app and receive a direct deposit within a week or opt for a check.

When is open season enrollment for military HCFSA?

Usually in the fall each year (around mid-November to mid-December). For 2025, your first chance to enroll will be in March 2025.

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