Flexible spending accounts get more attention as the year comes to an end, and many employees discover that they have accumulated quite a bit of cash. But here’s the problem: You could lose some or all of that money if you don’t use it before your plan’s deadline. A flexible spending account (FSA) allows eligible employees to set aside pretax dollars for qualifying healthcare expenses, potentially reducing their taxable income while helping cover medical costs. However, unlike a traditional savings account, an FSA comes with restrictions on how long you can keep unused funds. The Internal Revenue Service (IRS) generally treats health FSAs as “use-it-or-lose-it” accounts, although employers can offer certain exceptions. With the end of 2026 approaching, understanding your FSA year-end deadline could mean the difference between using money you’ve already set aside and forfeiting hundreds of dollars. Here’s what you need to know before December 31.
Why Your FSA Money Could Disappear After December 31
A healthcare flexible spending account allows employees to contribute pretax money through payroll deductions to pay for eligible medical expenses. For plan years beginning in 2026, the IRS established a $3,400 employee contribution limit, although employers may set lower limits.
Unlike health savings accounts, FSAs generally don’t allow participants to keep unused balances indefinitely. Under the traditional use-it-or-lose-it rule, money remaining after the applicable spending period may be forfeited unless the employer’s plan includes an authorized exception. If your employer uses a calendar-year plan, December 31, 2026, could be your final opportunity to incur eligible expenses using certain remaining funds.
Some Employees Can Carry Over Up to $680 Into 2027
The good news is that not every FSA year-end deadline results in the loss of your remaining balance. For health FSA plan years beginning in 2026, employers that permit carryovers can allow employees to transfer up to $680 in unused funds into the following plan year. This amount increased from the $660 maximum applicable to plan years beginning in 2025, reflecting annual inflation adjustments.
However, the IRS rules governing FSAs don’t require employers to offer carryovers, and individual plans may establish lower limits. If you have $900 remaining in an account that allows the full $680 carryover, you could still forfeit $220 unless you incur additional eligible expenses before the deadline.
Your Employer Might Offer a Grace Period Instead
Some employers choose to provide extra time to spend unused FSA money rather than allowing a carryover. Under IRS Publication 969, a health FSA may offer a grace period lasting up to two and a half months after the end of the plan year. For a calendar-year plan ending December 31, 2026, that could extend the spending period through March 15, 2027. However, employers generally cannot offer both a carryover and a grace period for the same health FSA plan year.
Before assuming you have extra time, review your benefits documents or contact your human resources department to confirm which option, if any, your employer provides.
Don’t Confuse the Spending Deadline With the Claims Deadline
One of the biggest misunderstandings surrounding the FSA year-end deadline involves the difference between incurring an expense and submitting a reimbursement claim. Your plan might require eligible healthcare services or purchases to occur by December 31 while allowing additional time to submit receipts. This extra filing period is commonly called a run-out period, and its length depends on the specific plan.
For example, the Federal Flexible Spending Account Program allows participants additional time to submit qualifying claims after the applicable benefit period ends. If you visited the dentist in November but haven’t requested reimbursement, you may still be able to recover those funds even after the spending deadline passes.
These Everyday Healthcare Purchases May Qualify
If you’re approaching your FSA year-end deadline with money remaining, you may have more eligible expenses than you realize. According to IRS Publication 502, qualifying medical expenses can include prescription medications, dental treatments, vision care, and certain medical supplies.
Many health FSAs also reimburse eligible over-the-counter medications, menstrual care products, first-aid supplies, and other qualifying healthcare purchases. For example, someone with $250 remaining might use those funds toward prescription eyeglasses, an eligible dental expense, or medically necessary supplies they already planned to purchase. However, cosmetic products, general wellness purchases, and expenses that don’t meet applicable eligibility rules may not qualify, so verify coverage before spending.
Dependent Care FSAs Follow Different Rules
Not every flexible spending account covers medical expenses, and confusing account types can lead to costly mistakes. A dependent care FSA generally helps eligible employees pay qualifying expenses for childcare or care for certain dependents who cannot care for themselves.
Dependent care FSAs have different eligibility requirements and do not qualify for the same carryover provision available to health FSAs. Some dependent care plans may offer a grace period, but participants should never assume their healthcare FSA rules apply to both accounts. If you contribute to more than one type of FSA, review each balance and deadline separately before scheduling expenses.
What Happens to Money You Don’t Spend?
If your employer’s plan doesn’t provide an applicable extension or carryover, unused FSA funds are generally forfeited after the spending period ends. Even plans allowing carryovers can require participants to surrender balances exceeding the permitted maximum. For instance, an employee with $1,200 remaining in a health FSA offering a $680 carryover could lose $520 if no additional qualifying expenses are incurred.
Employers generally cannot simply refund unused healthcare FSA contributions to employees as cash. That’s why reviewing your account balance several weeks before the deadline is more effective than discovering the problem after the new year begins.
Three Steps to Take Before Your Deadline Arrives
The easiest way to avoid losing money is to check your current FSA balance through your benefits administrator’s website or mobile app. Next, confirm your plan’s spending deadline, reimbursement submission deadline, and whether a carryover or grace period applies. Finally, review upcoming healthcare needs, including dental appointments, prescription refills, vision expenses, and eligible medical supplies. If you have $400 remaining, for example, you might schedule an overdue eye examination or purchase qualifying prescription glasses rather than making unnecessary last-minute purchases. Keep itemized receipts and supporting documentation because your administrator may require proof that expenses qualify for tax-free reimbursement.
Don’t Let Your Healthcare Savings Go to Waste
Your FSA year-end deadline deserves attention before holiday shopping, travel, and other December obligations take over your calendar. Although some employers allow up to $680 in unused 2026 health FSA funds to carry into 2027, others provide a grace period or require employees to use their money before the plan year ends. Understanding the difference could help you avoid forfeiting money that was already deducted from your paycheck. Take a few minutes to check your balance, review your plan documents, and identify legitimate healthcare expenses that qualify for reimbursement. With the right planning, you can make the most of your FSA benefits without rushing into unnecessary purchases simply to empty the account.
Have you ever lost money from a flexible spending account because you missed the deadline? Or have you discovered an unexpected healthcare expense that helped you use your remaining balance? Share your experience in the comments!
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Drew Blankenship is a seasoned personal finance and lifestyle writer with more than a decade of professional writing experience crafting clear, actionable advice that helps savers and investors over 40 protect their wealth and make smarter everyday decisions. His bylines appear regularly on SavingAdvice.com, CleverDude.com, and other respected outlets, where he draws on deep industry knowledge to deliver practical insights on cost control, smart spending, and long-term financial security.
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