FSA funds do not roll over to the next year under the standard "use-it-or-lose-it" rule

Money you contribute to a Flexible Spending Account (FSA) must be spent on may be able to access medical expenses during the plan year it was contributed to. Any balance remaining on December 31st is forfeited — your employer keeps it. This is a federal rule that applies to most FSAs, and it exists because FSAs are tax-advantaged accounts. The tradeoff for getting a tax break on healthcare spending is that you cannot carry the money forward.

However, there are two limited exceptions that let you preserve some or all of your FSA balance under specific circumstances. Understanding which exception applies to your plan matters, because the rules differ and the important date are strict.

Key Takeaways

  • FSA balances do not roll over to the next calendar year; unspent money is forfeited on December 31st under the standard rule.
  • A grace period allows you to spend the prior year's balance during the first 2.5 months of the new year, but only if your employer's plan includes this option.
  • A carryover provision lets you carry up to $610 (the 2024 limit, which changes yearly) into the next year, but again only if your plan offers it.
  • You cannot have both a grace period and a carryover in the same plan; your employer chooses one or neither.
  • Check your plan documents or call your benefits administrator to learn which option, if any, your FSA includes.

The grace period: spending last year's money in January and February

Some employers offer a grace period, which gives you an extra 2.5 months (usually January 1 through March 15) to spend any balance left over from the prior plan year. During this window, you can use the old year's money on may be able to access expenses as if it were still part of that year's account.

The grace period is optional — your employer decides whether to include it. If your plan has one, it is listed in your Summary of Benefits and Coverage or your plan documents. The grace period does not extend the important date for submitting receipts or claims; you still must submit documentation by the important date your plan sets, which is typically 60 to 90 days after the plan year ends.

One important limit: the grace period applies only to expenses incurred during those extra months. If you did not use your FSA balance by December 31st, you cannot go back and claim expenses from November or December of the prior year during the grace period.

The carryover option: rolling up to $610 into next year

A second option, called a carryover, lets you carry forward up to a set dollar amount (currently $610 for 2024, though this limit changes each year) into the next plan year. This is also optional and must be written into your plan by your employer.

If your plan includes a carryover, any balance you have on December 31st automatically rolls into the new year, up to the limit. Amounts above the limit are forfeited. You can then spend the carried-over balance during the new plan year on may be able to access expenses, just as you would spend your new contribution.

The carryover is simpler than the grace period because you do not have to remember to spend the money by a specific date — it straightforward becomes part of your new year's balance. However, the limit means that if you have a large balance, you will still lose the amount above the cap.

Grace period versus carryover: your employer picks one or neither

Your employer can offer a grace period, a carryover, or neither — but not both. This is a federal rule. If your plan has a grace period, it does not have a carryover, and vice versa. Some employers choose neither option, meaning the strict use-it-or-lose-it rule applies to your FSA.

The choice affects how you should plan your contributions. With a grace period, you have a cushion of 2.5 months to spend money you set aside. With a carryover, you have a full year to use the rolled-over amount, but you are capped at the annual limit. With neither option, you need to estimate your expenses carefully to avoid forfeiting money.

How to find out what your plan offers

Your FSA plan documents — usually called a Summary of Benefits and Coverage, Summary Plan Description, or plan guide — will state whether your plan includes a grace period, a carryover, or neither. These documents are typically sent to you when you enroll or when the plan year begins.

If you cannot find your plan documents, contact your employer's benefits administrator or human resources department. They can tell you in one call whether your FSA has a grace period or carryover and what the exact dates and limits are. Do not assume based on what a coworker's plan offers; rules vary by employer.

What counts as an may be able to access FSA expense

Whether you are spending your current year's balance, a grace period balance, or a carried-over balance, the same rules explore: you can only spend FSA money on may have access to medical expenses not covered by your health insurance. These include copays, coinsurance, deductibles, prescription medications, dental work, vision care, and certain medical equipment and supplies.

Over-the-counter medications and health products are may be able to access only if you have a prescription from a doctor. Cosmetic procedures, gym memberships, and general wellness products are not may be able to access. If you are unsure whether an expense qualifies, ask your FSA administrator or check the IRS list of may have access to medical expenses before you spend the money.

Planning your FSA contribution to avoid forfeiture

Because of the use-it-or-lose-it rule (or the limited grace period or carryover), you should estimate your medical expenses conservatively. A common strategy is to contribute only the amount you are confident you will spend, rather than the maximum allowed. This reduces the risk of forfeiting money at year-end.

Track your FSA spending throughout the year so you know how much balance remains. Many FSA providers offer online portals or mobile apps where you can check your balance and see your transaction history. If you notice a large balance in November, you can plan additional may be able to access expenses — such as scheduling a dental cleaning, ordering glasses, or filling prescriptions — before the year ends.

If your plan has a grace period, you have a bit more flexibility, but you should still try to spend down your balance by year-end rather than relying on the grace period as a safety net.

Frequently Asked Questions

Can I transfer my FSA balance to my spouse's FSA?

No. FSA balances are tied to your individual account and cannot be transferred to another person's account, even a spouse. If you leave your job or your employer ends the FSA plan, your balance is forfeited (except for any grace period or carryover your plan allows). The only exception is if you experience a may have access to life event, such as divorce, which may allow you to change your FSA election mid-year.

What happens to my FSA if I leave my job mid-year?

You lose access to your FSA balance when you leave your job, with limited exceptions. Some employers allow you to continue spending your balance through the end of the plan year if you leave, but this is not required. Check with your former employer's benefits administrator. You may be able to open a new FSA with your new employer if they offer one, but you cannot carry over the old balance.

Does the carryover limit increase every year?

Yes. The carryover limit is adjusted annually for inflation. In 2024, the limit is $610. The IRS announces the new limit each year, usually in late fall. Check your plan documents or contact your benefits administrator to learn the current year's limit.

If my plan has a grace period, can I still use my debit card after December 31st?

Yes, if your plan includes a grace period. Your FSA debit card typically remains active through the grace period (usually March 15), and you can use it to pay for may be able to access expenses incurred during those months. However, some plans require you to submit claims manually during the grace period rather than using the card. Check your plan documents or contact your FSA administrator for the exact process.

What if I do not spend my carryover balance by the end of the next year?

Any carryover balance that remains unspent at the end of the year it was rolled into is forfeited, just like any other FSA balance. The carryover does not give you a second grace period or a second carryover. You must spend it during the plan year it is available in.