Your FSA Can Carry Over Only $680: 6 Year-End Moves to Make Before the Deadline

The IRS allows up to $3,400 in a health FSA, but what happens to any unused money depends on the fine print in your plan.

If you contributed to a health flexible spending account (FSA) this year, some of that money could vanish when the plan year ends.

That doesn’t mean you did anything wrong. It simply reflects how the rules work. Anything you fail to spend by the deadline, beyond any carryover your plan permits, is lost.

The IRS sets the 2026 health FSA contribution limit at $3,400 of pretax wages. If your employer plan offers a carryover, the maximum amount that can roll into the next year is $680, according to the IRS.

Do the math. If you elected the full $3,400 and used only half, a carryover plan would leave you with $680 and cost you $1,020. With no carryover and no grace period, the entire $1,700 balance would disappear.

That is your own paycheck being handed back for nothing.

I’ve worked as a CPA since 1981, and I can think of few tax breaks that punish delay this sharply. Until your plan year ends, here are the moves I would make.

1. Determine which deadline applies to your plan

Before you spend a dime, figure out which type of plan your employer offers. There are three common setups:

• Carryover: Up to $680 of unused money can roll into the next year. Your plan may set a lower limit.
• Grace period: You get as much as 2½ extra months after the plan year ends to spend the funds.
• No extension: Any money left at the end of the plan year is forfeited.

Employers are not required to offer either a carryover or a grace period, and they cannot offer both, according to HealthCare.gov.

Check your benefits portal or plan summary to confirm which rule applies. Also make sure your plan year actually ends at the end of the calendar year, because the deadline follows the plan year, not the date on the calendar.

2. Schedule care now, because the service date is what matters

One of the most common mistakes is assuming the payment date controls eligibility. It doesn’t. Your FSA covers care you receive during the plan year, not simply care you pay for. FSAFEDS, the federal employee program, says an expense becomes eligible when the service is provided during the benefit period.

That means prepaying for a January appointment usually will not work. FSAFEDS says IRS rules do not allow reimbursement for expenses you have not yet incurred.

A dental cleaning on Dec. 29 counts for the current plan year. The same cleaning on Jan. 6 does not, unless your plan includes a grace period.

IRS Publication 502 says qualifying care includes dental cleanings, X-rays, fillings and eye exams. HealthCare.gov also notes that FSAs can pay deductibles and copays.

December appointments fill quickly, so if you’ve been putting off a checkup, call soon.

3. Replace the glasses or contacts you already need

One of the simplest ways to use up a few hundred dollars is to buy vision items you were likely going to purchase anyway.

Prescription eyeglasses and contact lenses count if they are medically necessary, and so do related supplies such as saline solution and lens cleaner, according to Publication 502.

That could mean a backup pair of glasses for the car or a full year of contacts instead of a smaller supply. Either way, you’re using pretax dollars instead of after-tax money.

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4. Restock the medicine cabinet

Over-the-counter medicines and menstrual products are eligible FSA expenses, whether or not a doctor wrote a prescription, according to IRS Publication 969. That includes pain relievers, allergy medication, cold remedies, tampons and pads.

OTC drugs have been eligible since January 2020 under the CARES Act, according to FSAFEDS.

One CPA note: If you itemize deductions, you generally cannot deduct nonprescription drugs, with insulin being the exception, per Publication 502. For those items, the FSA is usually the better option.

Just remember that products for general wellness or appearance do not qualify, FSAFEDS says. An FSA is not a beauty budget.

5. Refill prescriptions and buy approved medical supplies

If you rely on a maintenance medication, fill it before the plan year ends. FSAFEDS treats the prescription as received on the date the pharmacist fills it.

If the pharmacy price is the issue, compare cheaper ways to fill prescriptions before you pay.

Publication 502 also lists common qualifying supplies such as bandages, crutches, blood sugar testing kits and hearing aid batteries.

Keep every receipt. Publication 969 says your plan needs documentation from a third party, such as the pharmacy or provider, before it can pay the claim.

6. Use this year’s spending pattern to set next year’s election

Open enrollment is the time to correct the mistake of contributing more than you use.

Your employer’s enrollment materials should list the next year’s cap. The IRS posts the federal limit each fall, and if the next year’s figure is not available yet, you can plan around the current $3,400 limit.

Base your election on costs you can reasonably predict: glasses, dental work, routine prescriptions and copays. Premiums do not count.

The tax savings can be meaningful. If your taxable income exceeds $50,400 as a single filer or $100,800 if you are married filing jointly, you are in at least the 22% federal bracket for 2026.

At that rate, putting $3,400 through an FSA can reduce your federal income tax bill by as much as $748. It also avoids Social Security and Medicare tax.

Another advantage: The full annual amount is available on the first day of the plan year, even before you’ve contributed the full amount, according to Publication 969. That helps if you expect a big bill early in the year.

Do not confuse an FSA with a health savings account, or HSA. An HSA requires a high-deductible health plan, and its funds remain in the account until you spend them.

If your health plan choices are changing too, it may be worth reviewing how to compare employer health plans before you renew.

Bottom line

Your plan may give you extra time after the plan year ends to submit claims for eligible expenses. For federal workers using FSAFEDS, the deadline for submitting claims for the prior year is April 30, 2027. Miss that date, and you lose money you already spent.

But the medical or dental care itself has to happen by the plan deadline. For a calendar-year plan without a grace period, that deadline is Dec. 31.

So check your balance, schedule the appointment, buy the glasses and fill the prescription. And while you are working through your year-end list, see whether a Roth conversion could help use available room in your tax bracket.

Money you set aside for health care should not be lost just because the calendar changes.