When Do I Have to Use My FSA Money By?

Flexible Spending Accounts (FSAs) offer a valuable way to pay for healthcare expenses with pre-tax dollars, reducing your taxable income. These accounts operate on a “use-it-or-lose-it” principle, meaning that any money not used by a specific deadline can be forfeited.

Understanding the Standard Deadline

Most Flexible Spending Accounts operate under a standard “use-it-or-lose-it” rule, which dictates that funds must be spent by the end of the plan year. For many employer-sponsored plans, the plan year aligns with the calendar year, meaning funds typically need to be used by December 31st. Any funds remaining after this date are generally forfeited.

This forfeiture rule is a fundamental characteristic of FSAs, established by the Internal Revenue Service (IRS) regulations. Employers set the specific end date for their plan year, and this date is the default deadline for incurring eligible expenses.

Extending Your Deadline: The Grace Period

Some employers offer a grace period as an exception to the standard “use-it-or-lose-it” rule, providing a short extension after the plan year ends. This grace period allows participants an additional window of time, typically up to two and a half months, to use their remaining FSA funds from the previous plan year. During this extended period, you can continue to incur new eligible expenses and submit claims against the prior year’s balance.

For a plan year ending on December 31st, a common grace period would extend the deadline to March 15th of the following year. It is important to note that not all FSA plans offer a grace period, and the exact length of the period can vary, so checking with your plan administrator for specific details is always recommended.

Extending Your Deadline: The Carryover Rule

Another exception to the “use-it-or-lose-it” rule is the carryover option, where a limited amount of unused FSA funds can be rolled over into the subsequent plan year. For the 2025 plan year, the IRS permits a maximum carryover of $660. This means remaining funds, up to this amount, can be transferred to the new year and used for eligible expenses.

It is important to understand that employers offer either a grace period or a carryover, but typically not both. The specific amount that can be carried over may also be set lower by your employer, even if it is below the IRS maximum. Any funds exceeding the permitted carryover amount are forfeited. Checking your plan documents or consulting with your HR department will confirm if your employer’s FSA offers a carryover and what the specific limit is.

What You Can Spend FSA Money On

Flexible Spending Account funds are designed to cover a broad range of qualified medical expenses not typically reimbursed by other health plans. Common eligible expenses include deductibles, co-payments for doctor visits, and prescription medications. Over-the-counter drugs and certain medical supplies, such as bandages and first-aid items, are also generally eligible.

FSA funds can also be used for vision care, including eye exams, glasses, contact lenses, and even laser eye surgery. Similarly, dental care expenses, such as cleanings, fillings, and orthodontics, are usually covered. Many plans provide a dedicated debit card for convenient payment at the point of service, directly from your FSA.

Impact of Life Changes on Your FSA

Certain life changes can influence your Flexible Spending Account, particularly regarding fund availability and deadlines. If you leave your employment, either voluntarily or due to termination, your ability to use FSA funds typically ceases on your last day of employment. Any unspent funds are generally forfeited at that point.

While you usually cannot incur new expenses after your employment ends, most plans allow a limited time, often 30 to 90 days, to submit claims for eligible expenses incurred before your termination date. Other qualifying life events, such as marriage, divorce, or the birth or adoption of a child, may allow you to make changes to your FSA contribution election. However, these events generally do not extend the deadline for spending existing funds from a previous plan year.