Your Flexible Spending Account Could Expire Soon — What Becomes of Unused Funds?

Flexible spending accounts often get more attention as the year winds down, and many workers realize they still have money left in the account. The catch is that some or all of that balance can vanish if it is not used by the plan’s deadline. A flexible spending account, or FSA, lets eligible employees set aside pretax dollars for qualifying medical expenses, which can lower taxable income while helping pay healthcare costs. But unlike a standard savings account, an FSA comes with limits on how long unused money can remain available. The Internal Revenue Service generally treats health FSAs as “use-it-or-lose-it” accounts, though employers may offer certain exceptions. With the end of 2026 approaching, knowing your deadline could be the difference between spending money you already set aside and losing it. Here is what to know before December 31.

Why FSA Money Can Vanish After December 31

A healthcare flexible spending account allows workers to contribute pretax money through payroll deductions for eligible medical expenses. For plan years beginning in 2026, the IRS set the employee contribution limit at $3,400, although employers may impose lower caps.

Unlike health savings accounts, FSAs generally do not let participants keep unused balances indefinitely. Under the traditional use-it-or-lose-it rule, money left after the spending period may be forfeited unless the employer’s plan includes an approved exception. If your employer uses a calendar-year plan, December 31, 2026, may be the last day to incur eligible expenses with certain remaining funds.

Some Workers Can Roll Over Up to $680 Into the Next Year

The good news is that not every FSA deadline means losing the rest of your balance. For health FSA plan years beginning in 2026, employers that allow carryovers can permit employees to transfer up to $680 in unused funds into the next plan year. That is up from the $660 maximum for plan years beginning in 2025, reflecting inflation adjustments.

Even so, the IRS does not require employers to offer a carryover, and individual plans can set lower limits. If you have $900 left in an account that allows the full $680 carryover, you could still lose $220 unless you spend it on additional eligible expenses before the deadline.

Your Employer May Offer a Grace Period Instead

Some employers choose to give workers more time to spend unused FSA money instead of allowing a carryover. Under IRS Publication 969, a health FSA may include a grace period of up to two and a half months after the plan year ends. For a calendar-year plan ending December 31, 2026, that could extend the spending window through March 15, 2027. However, employers generally cannot offer both a carryover and a grace period for the same health FSA year.

Before assuming you have extra time, check your benefits materials or contact human resources to confirm which option, if any, your employer provides.

Do Not Mix Up the Spending Deadline and the Claims Deadline

One of the most common misunderstandings about FSA deadlines involves the difference between when an expense is incurred and when a reimbursement claim is filed. Your plan may require eligible healthcare services or purchases to happen by December 31 while allowing extra time to submit receipts. That additional filing window is often called a run-out period, and its length depends on the specific plan.

For example, the Federal Flexible Spending Account Program gives participants extra time to submit qualifying claims after the benefit period ends. If you saw a dentist in November but have not asked for reimbursement, you may still be able to recover those funds even after the spending deadline has passed.

Common Healthcare Purchases That May Qualify

If you are nearing your deadline with money still in the account, you may have more eligible expenses than you think. According to IRS Publication 502, qualifying medical costs can include prescription medications, dental care, vision services, and certain medical supplies.

Many health FSAs also cover eligible over-the-counter medicines, menstrual care products, first-aid supplies, and other qualifying healthcare items. For example, someone with $250 left might use it for prescription eyeglasses, an eligible dental expense, or medically necessary supplies they already planned to buy. Cosmetic products, general wellness purchases, and expenses that do not meet the eligibility rules may not qualify, so it is important to verify coverage before spending.

Dependent Care FSAs Work Differently

Not every flexible spending account is for medical costs, and mixing up account types can be expensive. A dependent care FSA generally helps eligible employees pay for qualifying child care expenses or care for certain dependents who cannot care for themselves.

Dependent care FSAs have different eligibility rules 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 not assume the rules for a healthcare FSA 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 Left Unspent?

If your employer’s plan does not include an applicable extension or carryover, unused FSA funds are generally forfeited after the spending period ends. Even plans that allow carryovers can require participants to give up balances above the permitted maximum. For instance, an employee with $1,200 left in a health FSA that allows a $680 carryover could lose $520 if no more qualifying expenses are incurred.

Employers generally cannot simply return unused healthcare FSA contributions to employees as cash. That is why checking your balance several weeks before the deadline is more useful than discovering the issue after the new year begins.

Three Things to Do Before the Deadline

The simplest 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 visits, prescription refills, vision expenses, and eligible medical supplies. If you have $400 remaining, for example, you might schedule an overdue eye exam or buy qualifying prescription glasses instead of making unnecessary last-minute purchases. Keep itemized receipts and supporting paperwork, since your administrator may ask for proof that the expenses qualify for tax-free reimbursement.

Do Not Let Health Savings Slip Away

Your FSA deadline deserves attention before holiday shopping, travel, and other December obligations fill your schedule. Although some employers allow up to $680 in unused 2026 health FSA funds to roll into the next year, others offer a grace period or require workers to use their money before the plan year ends. Understanding the difference can help you avoid losing money that was already taken 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 a little planning, you can get the most from your FSA benefits without rushing into unnecessary purchases just to empty the account.