What Happens to Your FSA Money at the End of the Year?

Every December I see the same panic happening in every mom Facebook group I am in. Someone posts that they have a few hundred dollars left in their FSA and they have no idea what to spend it on before December 31st. The responses are always a mix of helpful suggestions and people who genuinely did not know they had a deadline at all.

I have been there. I lost FSA money one year before I really understood how it all worked. So this post is my attempt to save you from making the same mistake.

Here is exactly what happens to your FSA money at the end of the year — and what you need to do about it.

The Use It or Lose It Rule

This is the rule that catches most people off guard. Unlike an HSA which rolls over indefinitely FSA money has an expiration date. Under IRS rules employers are not required to let unused FSA funds carry over from one plan year to the next. Most FSA plans follow the calendar year and require you to spend your balance by December 31st.

If you do not spend your FSA balance by the deadline the money is forfeited. It does not come back to you. It goes back to your employer. This is why FSA planning matters.

Does Your FSA Have a Grace Period?

Some employers offer a grace period that extends your spending deadline to March 15th of the following year. This gives you an extra two and a half months after December 31st to spend your remaining balance. Not all employers offer this — it is optional for the employer to provide.

Check your benefits documentation or call your HR department to find out if your plan has a grace period. It is worth knowing before you panic in December.

Does Your FSA Have a Rollover Option?

Some employers offer a rollover option which allows you to carry a limited amount of FSA money into the next plan year. For 2026 the maximum FSA rollover amount is $660 according to IRS Revenue Procedure 2024-40. This means if your plan offers rollover you can save up to $660 of unspent funds to use in the following year.

Important: your employer can only offer a grace period OR a rollover option — not both. And many employers offer neither. Check your specific plan details.

How to Find Out What Your Plan Offers

Log into your employee benefits portal and look for your FSA plan details. Your plan documents will specify whether you have a grace period, a rollover or neither. You can also call the number on the back of your FSA card or reach out to your HR department directly.

Know your deadline before November so you have enough time to plan your spending intentionally rather than scrambling at the last minute.

What to Do With Leftover FSA Money

If you find yourself with a balance to spend at the end of the year do not just buy random things. Here is how to spend it strategically.

Stock up on things you use regularly that are FSA eligible. Over the counter medications, sunscreen, allergy medications, pain relievers, menstrual products and first aid supplies are all things you will use anyway. Buying them now with pre-tax FSA dollars just means you are spending money you were already going to spend.

Treat yourself to something that feels like a luxury but qualifies. Mighty Patch acne patches, Supergoop sunscreen, Theragun Mini, red light therapy wand, Dr. Dennis Gross FaceWare Pro mask — all FSA eligible and all genuinely nice purchases to make with pre-tax dollars.

Schedule any medical appointments you have been putting off. Dental cleanings, eye exams, dermatologist visits, therapy appointments — all of these can be paid with your FSA card. Do not let the end of year sneak up without scheduling care you need.

How to Avoid Losing FSA Money Next Year

The best way to avoid losing FSA money is to elect an amount you are confident you will spend. A conservative approach — electing less than you might need — is often better than over-electing and scrambling at year end.

Think through your predictable expenses for the year: prescription costs, planned dental or vision appointments, contact lenses, regular medications. Add those up and use that as your baseline election amount. Then add a small buffer for the unexpected — sick kids, urgent care visits, replacing glasses.

Set a calendar reminder for October 1st to check your FSA balance and plan your remaining spending for the year. Two months is plenty of time to spend a remaining balance intentionally.

If this helped you save this post or share it with a mom who needs it

🩷 — Amanda

Sources

IRS Revenue Procedure 2024-40 — 2026 FSA contribution limit $3,400 and carryover cap $660 — irs.gov

IRS Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans — grace period and rollover rules — irs.gov/publications/p969

SpendRebel FSA Eligible Items 2026 — spendrebel.com/blog/fsa-eligible-items-2026

This post contains affiliate links. FSA eligibility varies by plan — always confirm with your plan administrator.