What Happens to Unused FSA Money at Year-End

You cannot roll over unused FSA money to the next year — the money you don't spend by December 31 is forfeited

Flexible Spending Accounts operate under a "use-it-or-lose-it" rule set by the IRS. Any balance remaining in your FSA on December 31 does not carry forward to January 1 of the following year. The money reverts to your employer, and you lose access to it. This rule applies to the vast majority of FSA plans, with only one narrow exception that most workers do not have access to.

The purpose of this rule is to prevent people from accumulating large tax-free balances indefinitely. Because FSA contributions reduce your taxable income, the IRS limits how long you can hold the money. Understanding this deadline and the one exception that exists can help you avoid leaving money on the table.

Key Takeaways

• FSA money you do not spend by December 31 is forfeited — there is no rollover to the next year under standard rules.
• A limited number of employers offer a grace period of up to 2.5 months into the new year to spend the prior year's balance, but this is optional and uncommon.
• Some employers allow a carryover of up to $610 (for 2024) into the next year, but only if they have adopted this provision in their plan document.
• The best strategy is to estimate your spending carefully during open enrollment and adjust your contribution amount each year based on what you actually used.
• If you have unused funds late in the year, you can still incur expenses and submit receipts for reimbursement before the deadline.

The Standard Rule: Use It or Lose It by December 31

Under IRS rules, any FSA balance remaining on December 31 is lost. You cannot transfer it to a spouse's FSA, move it to a Health Savings Account, or carry it forward as a credit. The money simply disappears from your account, and your employer retains it.

This applies to both dependent care FSAs and healthcare FSAs. The only exception is if your employer has specifically chosen to offer either a grace period or a limited carryover — and most do not. You should check your plan documents or ask your benefits administrator whether your employer offers either option, because the default is forfeiture.

The Grace Period Option: Spending Until Mid-March

Some employers allow a grace period of up to 2.5 months after the year ends. If your employer offers this, you can spend money from your prior-year FSA balance through mid-March of the following year without losing it. For example, if you had $400 left in your healthcare FSA on December 31, 2024, and your employer offers a grace period, you could submit claims for expenses incurred through March 15, 2025.

The grace period applies only to expenses you actually incur during that window — not to money you simply want to hold. You must still have a receipt or proof of the expense. Not all employers offer this, and it is entirely optional under IRS rules. Check with your benefits administrator or your plan summary to see if your employer has adopted a grace period.

The Carryover Option: Up to $610 Carried Forward

A second option, less common than the grace period, is a limited carryover. Employers who choose this can allow you to carry forward up to a set dollar amount into the next plan year. For 2024, that limit is $610. For 2025, the IRS will announce an updated limit, which typically increases slightly each year for inflation.

If your employer offers a $610 carryover and you have $800 left on December 31, you keep $610 and lose $190. If you have $500 left, you keep all $500. An employer cannot offer both a grace period and a carryover in the same plan — they must choose one or neither. Again, check your plan documents to know which (if any) your employer has chosen.

How to Avoid Losing Money: Estimate Carefully at Open Enrollment

The best way to protect yourself is to estimate your FSA spending accurately during open enrollment, which typically happens in the fall. Look back at the prior year: what did you actually spend on may be able to access expenses? Add any new expenses you expect — a planned surgery, new glasses, orthodontia for a child, or increased dependent care costs.

FSA contribution limits for 2024 are $3,300 for healthcare FSAs and $5,000 for dependent care FSAs (these limits may change for 2025). You do not have to contribute the maximum. Contribute only what you reasonably expect to spend. If you are uncertain, contribute less — you can always pay for some expenses out of pocket if your FSA runs out.

If your circumstances change during the year — you have a baby, start a new job, or your childcare costs drop — you may be able to change your FSA contribution mid-year during an open enrollment period or if you have a may have access to life event. Ask your benefits administrator what changes allow you to adjust your election.

What Counts as an FSA-may be able to access Expense

To spend down your FSA before year-end, you need to know what the IRS considers may be able to access. For healthcare FSAs, may be able to access expenses include copays, deductibles, prescription medications, dental work, vision care, and certain medical equipment. Over-the-counter medications now require a prescription to be reimbursed (this changed in 2011). Cosmetic procedures, gym memberships, and vitamins are not may be able to access.

For dependent care FSAs, may be able to access expenses are costs to care for a child under 13 or a disabled dependent while you work — daycare, preschool, after-school programs, and summer camps. Tuition for kindergarten and above is not may be able to access, nor is overnight camp.

If you are unsure whether a specific expense qualifies, ask your FSA administrator or check the IRS Publication 502 for healthcare expenses and Publication 503 for dependent care. You can also submit a receipt and let the administrator tell you whether it is reimbursable before you spend more money on similar items.

Submitting Claims Before the Deadline

If you have unused FSA funds in November or December, you can still incur expenses and submit them for reimbursement. You do not have to spend the money before December 31 — you have to incur the expense by that date. This means you can schedule a dental cleaning in December, pay for it with your FSA debit card or out of pocket, and submit the receipt in January and still be reimbursed from your prior-year balance.

The key is the date of service, not the date you submit the claim. If your dentist saw you on December 15, that expense is may be able to access even if you file the claim on January 10. However, if your employer offers a grace period, you have until mid-March to incur new expenses. If not, December 31 is your deadline.

Frequently Asked Questions

Can I move unused FSA money to my spouse's FSA?

No. FSA accounts are individual and cannot be combined or transferred between spouses. Each person's unused balance is forfeited separately on December 31, unless the employer offers a grace period or carryover.

Can I use my FSA debit card to buy anything and then return it to keep the money?

No. The IRS requires that FSA expenses be for actual medical or dependent care costs. Buying items and returning them to preserve the balance is fraud and can result in penalties and loss of FSA may be able to access.

What if I change jobs — do I lose my FSA balance?

Yes. When you leave your employer, your FSA balance is forfeited immediately, regardless of the time of year. You do not carry it to a new employer's FSA. This is one reason to spend down your FSA before you leave a job.

Does the carryover limit apply to dependent care FSAs too?

Yes. If your employer offers a carryover, the $610 limit (for 2024) applies to both healthcare and dependent care FSAs. Some employers offer a carryover for one type and not the other, so check your plan documents.

Can I change my FSA contribution mid-year if I realize I will not spend it all?

Only if you have a may have access to life event — birth of a child, loss of coverage, significant change in dependent care costs, or divorce. A simple change of mind is not enough. Open enrollment in the fall is when most people adjust their contributions for the coming year.