FSA Use-It-or-Lose-It: Spending Down Before December 31

Every December, millions of dollars in FSA funds vanish. Not because they’re stolen, but because account holders simply ran out of time. If you’ve got money sitting in a flexible spending account right now, the clock is ticking toward your FSA use-it-or-lose-it deadline. The good news: you still have time to spend it wisely. Here’s how to make every dollar count before the year ends.

How FSA Deadlines, Grace Periods, and Carryovers Work

The basic rule is straightforward. Any money you set aside in a health care FSA must be used for eligible expenses within the plan year, or you forfeit it. For most employer plans, that year ends December 31.

But the IRS gives employers two optional safety valves. Your plan can offer one of these, both, or neither:

Your employer picks one or the other. Some plans offer neither, which means December 31 is a hard wall. Check your plan documents or ask HR which option yours includes.

One detail people miss: a grace period extends the time to spend, not the time to contribute. You can’t add new money during those extra months. And a carryover doesn’t protect your entire balance. If you have $1,200 left on December 31 and your plan allows a $680 carryover, you’d lose $520.

Dependent Care FSAs Are Different

Dependent care FSAs follow the same use-it-or-lose-it structure, but they don’t qualify for the carryover provision. Your employer might still offer a grace period for dependent care accounts. If not, December 31 is your firm deadline for those funds too.

Checking Your Balance and Plan Rules

Start with the number. Log into your FSA administrator’s portal or app. Common administrators include HealthEquity, WEX, and Optum Financial. Your current balance should be front and center.

Then confirm three things:

1. Your remaining balance (subtract any pending claims)
2. Whether your plan offers a grace period or carryover
3. The last date to submit reimbursement claims for 2026 expenses (often 90 days after plan year end)

That third point matters. You might incur an expense on December 30 but not file the claim until February. Most plans allow this, but each has its own filing deadline. Miss it, and a perfectly valid expense goes unreimbursed.

Look for Forgotten Receipts

Before you rush to spend, check whether you’ve already paid for eligible items out of pocket this year. Prescription copays, lab work, physical therapy sessions: any of these might be reimbursable if you still have the receipt. Pull up your pharmacy app’s purchase history or your health insurance’s explanation of benefits. You might recover hundreds without buying anything new.

Know Your Exact Spending Target

If your plan has a $680 carryover, you don’t need to zero out the account. You need to spend down to $680 or below. That changes the math. Say you have $900 left. You only need to find $220 in eligible expenses, not $900.

Eligible Purchases Worth Making Now

FSA-eligible expenses go well beyond doctor visits. The IRS defines eligible items broadly under Publication 502, and many everyday health products qualify.

Here’s a practical list organized by category:

• Vision: prescription glasses, contact lenses, prescription sunglasses, lens solution, eye exams
• Dental: cleanings, fillings, orthodontia payments, dental X-rays
• Over-the-counter items: pain relievers, allergy medicine, antacids, first-aid supplies, sunscreen (SPF 15+), menstrual products
• Medical devices: blood pressure monitors, thermometers, TENS units, heating pads, braces and supports
• Preventive care: flu shots, annual physicals, lab work, health screenings

A few high-value moves if you have a larger balance to spend:

• Schedule that dental cleaning or eye exam you’ve been putting off
• Stock up on contact lenses for the next several months
• Buy prescription sunglasses you’ve wanted
• Pick up a year’s supply of allergy medication or daily vitamins (if prescribed)
• Get fitted for custom orthotics or a new pair of prescription glasses

What Doesn’t Qualify

Cosmetic procedures, gym memberships, and general wellness supplements (without a prescription) aren’t eligible. Teeth whitening is out. So are most toiletries and cosmetics, even if they claim health benefits. When in doubt, check the FSA Store or your administrator’s eligibility list before swiping your card.

The Receipt Rule

Keep every receipt. Your FSA administrator can request documentation for any purchase, sometimes years later. A photo stored in your phone’s notes app works. So does a dedicated folder in your email for forwarded e-receipts.

Setting Next Year’s Contribution

If your employer’s open enrollment is still open, it is also the time to set next year’s election. That means you’re choosing your 2027 FSA contribution right now, while also spending down your 2026 balance. Use this moment to recalibrate.

Look at what you actually spent this year. Your FSA administrator’s transaction history tells the story. If you’re scrambling to spend $800 in December, you probably elected too much. If you ran out by September, you left tax savings on the table.

Here’s a simple framework:

1. Add up your 2026 FSA transactions
2. Subtract any panic purchases made just to avoid forfeiture
3. The remaining number is your true annual health spending through the FSA
4. Set your 2027 election close to that figure, plus a small buffer for unexpected copays

The IRS health care FSA contribution limit for 2026 is $3,400. You don’t have to max it out. A realistic election based on your actual spending pattern saves more money than an aggressive one that leaves you scrambling every December.

Couples Should Coordinate

If both you and your partner have access to an FSA through your respective employers, coordinate your elections. One person might cover vision and dental expenses. The other might handle prescriptions and copays. This avoids double-covering the same category while leaving money stranded in one account.

Factor In Life Changes

Expecting a baby, planning a surgery, or starting orthodontia in 2027? These are predictable, high-cost events. Build them into your FSA election now. A single orthodontia down payment or hospital copay can justify a much higher contribution.

Keeping FSA Money Out of Your Spending Number

Here’s where most people trip up. FSA funds sit in what looks like a debit account, and it’s tempting to think of that balance as spending money. It isn’t. It’s restricted cash with an expiration date.

The smartest move is to treat your FSA balance as a separate line item, completely outside your regular cash flow. When you’re figuring out what’s safe to spend before your next paycheck, FSA money shouldn’t factor in. It can only go toward eligible health expenses, so it doesn’t help you cover groceries or rent.

If you use Amppfy to see your Safe-to-Spend™ number, your FSA balance stays out of that calculation by design. You enter your checking and savings balances, not restricted accounts. The math stays clean: $3,412 cash − $1,240 bills − $400 savings − $500 cushion = $1,272 Safe-to-Spend™. No FSA dollars muddying the picture.

Set a Calendar Reminder

Don’t rely on memory. Put a reminder on your phone for the first week of December: “Check FSA balance and spend down.” A second reminder two weeks later gives you a final push. Two alerts, five minutes of attention, and you protect money you’ve already earned.

Track Reimbursements Separately

If you pay out of pocket and submit for reimbursement later, that incoming FSA reimbursement is a refund, not income. When it hits your bank account, it restores cash you already spent. Keep a simple note of pending reimbursements so you’re not surprised by deposits or confused about your actual balance.

Frequently Asked Questions

What happens to my FSA money after the deadline passes?
Any balance above your plan’s carryover limit (or the full balance if your plan has no carryover or grace period) goes back to your employer. You can’t appeal or recover it. The IRS rule is firm: forfeited funds are gone. This is exactly why checking your balance in early December matters so much.

Can I use my 2026 FSA funds for expenses in January 2027?
Only if your plan includes a grace period. A grace period extends your spending window through March 15, 2027, for a calendar-year plan. If your plan uses a carryover instead, any amount above the $680 limit is forfeited on December 31, and the carried-over portion applies to 2027 expenses going forward.

Do FSA purchases need a prescription?
Not for most over-the-counter health items. Since the CARES Act of 2020, products like pain relievers, allergy medicine, and menstrual care products are FSA-eligible without a prescription. Some items, like vitamins and supplements, still require a letter of medical necessity from your doctor.

Is there a way to change my FSA election mid-year?
Generally, no. FSA elections are locked for the plan year unless you experience a qualifying life event: marriage, divorce, birth of a child, or a change in employment status. Outside of those events, you’re committed to the amount you chose during open enrollment. That’s why getting your annual election right matters.

Make Your FSA Work on Your Schedule

The FSA forfeiture rule sounds punishing, but it’s really just a planning problem. Know your deadline. Check your balance early. Spend on things you’d buy anyway: glasses, contacts, medication, dental work. Then set next year’s election based on what you actually spent, not what felt like a good number last November.

If you want a clearer picture of your money heading into the new year, get Amppfy free. Enter your balances, bills, and payday once, about ten minutes, and your Safe-to-Spend™ number is always there. It’s a good way to start 2027 knowing exactly where you stand.