FSAs do not roll over — you lose any money left in your account on December 31st

A Flexible Spending Account (FSA) operates under a "use-it-or-lose-it" rule set by the IRS. Any balance remaining in your account at the end of the plan year does not carry forward to the next year. The money reverts to your employer, and you cannot access it after the deadline.

The only exception is a limited carryover that some employers offer: up to $640 (as of 2024, though this amount can change annually) may roll into the following year if your employer's plan includes this provision. Even with a carryover option, any amount above that limit is forfeited. You do not get a refund, and the money does not go into a savings account you control.

This rule applies to both healthcare FSAs and dependent care FSAs, though the carryover limits and rules differ slightly between the two. Understanding your plan's specific terms before the year ends is the only way to avoid losing money you have already set aside.

Key Takeaways

  • Money left in your FSA at the end of the plan year is forfeited unless your employer offers a carryover option.
  • If your employer allows it, you may carry over up to $640 into the next year (the amount can change annually based on IRS rules).
  • Any amount above the carryover limit is lost permanently — there is no refund or way to recover it.
  • The best strategy is to estimate your annual healthcare or dependent care costs carefully and contribute only what you expect to spend.
  • If you have unused funds near year-end, you can still incur may be able to access expenses and submit receipts for reimbursement through early the following year.

How the use-it-or-lose-it rule actually works

The IRS created the use-it-or-lose-it rule to prevent FSAs from becoming long-term savings accounts. Because FSA contributions reduce your taxable income, allowing unlimited carryovers would let people build tax-free medical savings indefinitely. To keep the accounts focused on current-year expenses, any unused balance simply disappears at year-end.

Your employer does not hold the money in a separate account waiting for you to claim it later. Once December 31st passes, the funds are gone. Some employers use forfeited FSA money to offset plan administration costs, while others return it to the general company budget. Either way, it is no longer yours to access.

This is different from a Health Savings Account (HSA), which does roll over year to year and functions more like a savings account. If you have an HSA through a high-deductible health plan, that money stays with you indefinitely.

The carryover option: what it covers and what it does not

Some employers voluntarily offer a carryover provision that lets you keep up to $640 of unused FSA funds (for 2024) into the next plan year. This is not automatic — your employer must include it in the plan design, and you need to check your plan documents to know whether yours does.

The carryover amount is set by the IRS and adjusts annually for inflation. In recent years it has been $570 to $640, so check your employer's benefits materials or contact your plan administrator to confirm the current limit. If you have $800 left on December 31st and your plan allows a $640 carryover, you lose $160.

The carryover applies to the full amount you did not spend — you do not get to choose which expenses carry over. The money simply extends your deadline to spend it, typically through March 15th of the following year (though your employer's plan may set a different date). After that second deadline passes, any remaining balance is forfeited again.

The grace period option: a different way to extend your spending window

Some employers offer a grace period instead of a carryover. A grace period typically gives you an extra 2.5 months (through March 15th) to incur and submit claims for expenses from the previous plan year, using money from that year's FSA balance.

This is not the same as rolling money over. You are still spending from the previous year's account, just with a longer deadline to submit receipts. Once the grace period ends, any unused balance is forfeited. An employer can offer a grace period, a carryover, or neither — but not both simultaneously.

If your plan includes a grace period, you can still incur may be able to access expenses in January, February, and March and have them paid from your prior-year FSA funds. This gives you more time to use the money without actually carrying a balance forward into a new plan year.

How to avoid losing money: estimate and track carefully

The best defense against forfeiture is accurate planning. Before the plan year begins, estimate your healthcare costs or dependent care costs based on the previous year. Include recurring expenses like copays, prescriptions, dental work, vision care, and childcare. Be conservative — it is better to contribute less and add money later than to overestimate and lose the difference.

Track your spending throughout the year using your FSA debit card or by keeping receipts for manual reimbursement. Many FSA administrators offer online portals or mobile apps that show your balance and let you see claims in real time. Checking your balance quarterly helps you adjust if you are on pace to overspend or underspend.

In the final months of the year, review your remaining balance. If you have unused funds, look for may be able to access expenses you can incur before December 31st. Dental cleanings, eye exams, over-the-counter medications (with a prescription), and other routine care can often be scheduled quickly. If you have a dependent care FSA, you can also prepay for childcare services that will be provided in January.

What counts as an may be able to access expense you can use before year-end

FSA funds cover a wide range of healthcare and dependent care costs. For healthcare FSAs, may be able to access expenses include copays, deductibles, coinsurance, prescription medications, dental work, vision care, hearing aids, and certain over-the-counter items (like pain relievers or allergy medicine) if you have a prescription from your doctor. Mental health services, physical therapy, and medical equipment also may have access to.

For dependent care FSAs, may be able to access expenses are limited to childcare or adult daycare that allows you to work. This includes daycare centers, nannies, after-school programs, and summer camps (if they are primarily childcare rather than enrichment). Tuition for preschool or kindergarten counts only if the school provides childcare as part of the program.

If you are unsure whether a specific expense qualifies, contact your FSA plan administrator before you incur it. Some expenses sit in a gray area, and getting confirmation in writing protects you if the claim is later denied.

What happens if you change jobs or lose coverage mid-year

If you leave your job or lose FSA coverage before the plan year ends, you typically forfeit any unused balance immediately. Your FSA is tied to your employer's plan, and coverage ends when your employment ends. You cannot transfer the balance to a new employer's FSA or to an HSA.

The exception is if you experience a may have access to life event — such as a change in family status, loss of other health coverage, or a significant change in childcare costs — you may be able to make changes to your FSA election during open enrollment or through a special enrollment period. But this does not recover money you have already forfeited.

If you are planning to leave a job, try to spend down your FSA balance before your last day. Submit any pending claims quickly, and incur may be able to access expenses in your final weeks if possible. Once you are no longer employed, the account is closed.

Frequently Asked Questions

Can I get my FSA money back if I do not use it?

No. The IRS use-it-or-lose-it rule means forfeited FSA funds do not return to you as a refund or tax credit. The money goes back to your employer. The only exception is if your employer's plan includes a carryover option, which lets you keep up to $640 into the next year.

What if I have a medical emergency in January and need money I lost in December?

You cannot access forfeited FSA funds. If you had money left over and it was forfeited, it is gone. This is why planning your contributions carefully is important. For future years, consider contributing less if you consistently have leftover balances, or look into an HSA if you are may be able to access, since HSA funds roll over indefinitely.

Does my employer have to offer a carryover or grace period?

No. Carryovers and grace periods are optional employer benefits. Your plan may offer neither, one, or the other. Check your plan documents or ask your benefits administrator which option, if any, your employer provides.

Can I roll my FSA into an HSA?

No. FSA and HSA are separate accounts with different rules. You cannot transfer an FSA balance to an HSA. However, if you leave a job with an FSA and move to a job with an HSA, you can start contributing to the HSA going forward — but any unused FSA balance is forfeited.

What if I submit a claim after December 31st for an expense I had in December?

Most FSA plans allow you to submit claims for expenses incurred in the plan year through a deadline in the following year — often March 15th or later. The key is the date you incurred the expense, not the date you submit the claim. If you had a dental visit in December, you can usually submit the receipt in January or February and still be reimbursed from your prior-year FSA balance.