Can I Use Current Year FSA for Prior Year Expenses?
Navigate the complexities of your Flexible Spending Account. Learn the critical factors determining when your healthcare expenses qualify for reimbursement.
A Flexible Spending Account (FSA) is an employer-sponsored benefit that allows individuals to set aside pre-tax money from their paycheck for qualified out-of-pocket healthcare expenses. These funds are not subject to federal income tax, Social Security tax, or Medicare tax, providing a tax advantage. The Internal Revenue Service (IRS) regulates FSAs, including annual contribution limits, which were $3,200 for 2024 and increased to $3,300 for 2025. FSAs generally follow the “use-it-or-lose-it” rule, meaning unused funds at the end of a plan year are forfeited.
FSA Plan Years and Reimbursement Deadlines
An FSA operates on a specific “plan year,” which is typically a 12-month period defined by your employer. Expenses must be incurred within this specific plan year to be eligible for reimbursement from the funds contributed for that year.
There are two common exceptions to this rule. The first is a grace period, which employers may offer. A grace period provides an extension of time, typically up to two and a half months after the plan year ends, during which you can incur new eligible expenses and use any remaining funds from the previous plan year. For example, if your plan year ends on December 31, a grace period might extend your spending deadline to March 15 of the following year.
The second exception is a carryover option, which allows a limited amount of unused funds to transfer from one plan year to the next. For 2025, the maximum carryover amount allowed by the IRS is $660. An employer can choose to offer either a grace period or a carryover, but typically not both.
Beyond these extensions, a “run-out period” provides a timeframe after the plan year (and any grace period) to submit claims for expenses already incurred. This period is for submitting claims, not for incurring new expenses. While the duration of a run-out period is determined by the employer, a common timeframe is 90 days after the plan year ends. For instance, if your plan year ends on December 31, and you have a 90-day run-out period, you would have until March 31 of the following year to submit claims for reimbursement.
Outside of a grace period, current year FSA funds cannot be used for expenses incurred in a prior plan year. The funds are tied to the plan year in which they were contributed and the expenses were incurred. Consult your specific FSA plan documents for exact rules, deadlines, and available grace periods or carryover options.
How to Submit Your FSA Claim
Submitting an FSA claim involves gathering documentation and submitting it to your plan administrator. Documentation includes itemized receipts, Explanation of Benefits (EOB) from your insurance, or pharmacy printouts for prescriptions. These documents must clearly show the patient’s name, the date of service, a description of the service or item, and the dollar amount owed. Credit card receipts alone are generally insufficient as they often lack the detailed service description required by IRS regulations.
Claims can be submitted through the plan administrator’s online portal, by fax, or by mail. Many administrators offer an online portal where you can log in, select the option to submit a claim, complete the necessary fields, and upload digital copies of your documentation. Some plans also offer mobile apps for convenient submission by taking a photo of your receipt.
Claims are typically processed within one to two business days. Reimbursement is commonly issued via direct deposit to your bank account or by check. If additional documentation is required or if a claim is denied due to insufficient information, you will usually be notified by email or mail, and you may need to resubmit the claim with the requested details.