FSAs do not roll over unused money to the next year — you lose what you don't spend

Flexible Spending Accounts operate under a use-it-or-lose-it rule. Any money you contribute but do not spend on may be able to access medical or dependent care expenses by the end of the plan year is forfeited. You cannot carry the balance forward, transfer it to another account type, or get it back as a refund. The only exception is a limited carryover that some employers offer, which allows you to roll a small amount into the next year under specific conditions.

This rule exists because FSAs are funded with pre-tax dollars. The IRS treats unused balances as a forfeiture to prevent people from using FSAs as tax-free savings vehicles rather than spending accounts for actual expenses.

Key Takeaways

  • Money left in your FSA at the end of the plan year is lost unless your employer offers a carryover option.
  • Some employers allow you to carry over up to $610 (for 2024) into the next plan year, but this is optional and not all plans offer it.
  • A grace period of up to 2.5 months after the plan year ends lets you spend down your FSA balance on may be able to access expenses incurred during that time.
  • You can change your FSA contribution amount during open enrollment or after a may have access to life event, so adjust based on what you actually spent the previous year.
  • Submitting receipts and claims promptly helps you track spending and avoid accidentally forfeiting money.

How the use-it-or-lose-it rule works in practice

Your plan year typically runs January through December, though some employers use different dates. On December 31 (or your plan year end date), any balance remaining in your FSA is gone. If you contributed $2,500 for the year and spent $1,800 on copays, glasses, and dental work, the remaining $700 disappears. You cannot withdraw it, roll it to a savings account, or use it next year.

This applies even if you have submitted receipts for expenses but have not yet been reimbursed. The cutoff is based on when expenses are incurred (the date of service), not when you claim them. If you had a dental procedure on December 15, you can claim it against your 2024 FSA even if you submit the receipt in January 2025 — as long as the service date falls within your plan year.

Carryover: the limited exception some employers offer

Some employers choose to allow a carryover, which lets you move unused FSA money into the next plan year. The IRS caps this at $610 for 2024 (the limit increases slightly each year for inflation). If your plan offers carryover and you have $700 left on December 31, you can roll $610 forward and lose the remaining $90.

Carryover is entirely optional — your employer decides whether to offer it. Check your plan documents or ask your benefits administrator whether your FSA includes this option. If it does, you typically do not need to do anything; the carryover happens automatically. If it does not, you have no way to preserve unused money.

Not all employers offer carryover. Those who do not may instead offer a grace period, which is a different tool for spending down your balance.

Grace periods: extra time to spend your FSA balance

A grace period is an extension at the end of your plan year during which you can spend your FSA balance on expenses incurred during that extension. The IRS allows grace periods of up to 2.5 months after the plan year ends. If your plan year ends December 31, a grace period could extend through mid-March, giving you extra time to incur and claim expenses.

Grace periods and carryover are mutually exclusive — your employer can offer one or the other, but not both. A grace period is useful if you know you have predictable expenses coming in January or February (such as annual eye exams or dental cleanings). You can schedule those appointments during the grace period and pay for them with your remaining FSA balance.

Like carryover, a grace period is optional. Your plan documents will state whether your employer uses one and how long it lasts. If your plan offers neither carryover nor a grace period, you must spend your full balance by December 31 or lose it.

Strategies to avoid losing money

The most effective strategy is to estimate your expenses accurately during open enrollment. Review what you spent in the previous year on copays, prescriptions, dental work, vision care, and other may be able to access expenses. If you spent $1,500 last year, contribute close to that amount this year rather than guessing high and forfeiting money.

Keep receipts and submit claims throughout the year rather than waiting until December. This helps you track your spending in real time and see how much balance remains. Many FSA providers offer a mobile app or online portal where you can view your balance and upload receipts when ready.

If you have a predictable large expense coming — such as a scheduled surgery, orthodontic treatment, or new glasses — time it within your plan year and submit the claim promptly. Dependent care FSAs work the same way; if you use daycare, estimate your annual costs and contribute accordingly.

If your employer offers a grace period, schedule routine appointments (eye exams, dental cleanings, annual physicals) toward the end of your plan year or during the grace period. This gives you a window to use up remaining funds on legitimate expenses.

What counts as an may be able to access FSA expense

FSAs cover a broad range of medical and dependent care costs. Medical FSAs cover copays, coinsurance, deductibles, prescription drugs, dental work, vision care (glasses, contacts, exams), hearing aids, and many over-the-counter items like pain relievers and allergy medicine (with a prescription). Dependent care FSAs cover daycare, preschool, after-school programs, and summer camps for children under 13.

Expenses must be for you, your spouse, or your dependents. Cosmetic procedures, gym memberships, and general wellness products are not covered. If you are unsure whether an expense qualifies, ask your FSA administrator or check the IRS Publication 502 (Medical and Dental Expenses) for a detailed list.

What happens if you change jobs or lose coverage

If you leave your job mid-year, your FSA coverage typically ends on your last day of employment. You forfeit any unused balance, even if your new employer offers an FSA. You cannot transfer the money to a new plan or get it refunded.

However, you may be able to continue FSA coverage through COBRA (Consolidated Omnibus Budget Reconciliation Act) if your employer has 20 or more employees. COBRA lets you keep your FSA for a limited time, usually up to 18 months, though you pay the full premium yourself. This is rarely cost-effective for FSAs, but it is an option if you have a large balance and significant upcoming expenses.

Frequently Asked Questions

Can I get my FSA money back if I don't use it?

No. The IRS use-it-or-lose-it rule means forfeited FSA money goes to your employer or the plan administrator — you cannot recover it as a refund or tax deduction. The only exception is if your employer offers a carryover, which lets you move up to $610 into the next year.

What if I have a medical expense in January but my plan year ended in December?

If the service date is in January, it is not covered by your previous year's FSA. However, if your plan offers a grace period extending into January or February, you can use remaining 2024 balance for expenses incurred during that grace period. Check your plan documents to see if a grace period applies.

Can I change my FSA contribution if I realize I'm going to lose money?

No, you cannot change your contribution mid-year unless you have a may have access to life event (such as a birth, marriage, divorce, or loss of other coverage). Open enrollment happens once a year, usually in the fall. If you realize you will forfeit money, you can adjust your contribution for next year based on what you actually spent.

Does a dependent care FSA have the same use-it-or-lose-it rule?

Yes. Dependent care FSAs operate under the same use-it-or-lose-it rule as medical FSAs. Any unused balance at the end of the plan year is forfeited unless your employer offers a carryover or grace period.

What if my employer offers both carryover and a grace period?

Employers cannot offer both — the IRS allows one or the other. Your plan documents will specify which option your employer chose. If you are unsure, contact your benefits administrator.