A flexible spending account, or FSA, is a benefit some companies offer employees to help them efficiently manage their health care expenses. With an FSA, you can save on certain out-of-pocket medical expenses.
However, unlike a health savings account, or HSA, it is possible to forfeit the cash held in an FSA if you don’t use it by the end of the year or at least before your employer’s grace period ends.
To avoid letting the funds go to waste, take stock of any money in your FSA account. When you know how much you have, make a plan to spend it before it expires.
What Is a Health Care FSA?
An FSA is a tax-advantaged account designed to help employees save on their health care expenses. Typically offered as an employee benefit, these accounts let you deposit pretax dollars from your paycheck and use the balance to cover qualifying expenses throughout the year.
There are important differences from an HSA, including the contribution limits set by the IRS.
In 2026, you can contribute up to $3,400 into an FSA. But if you have an HSA, you can contribute up to $4,400 for yourself and up to $8,750 for family coverage.
“Any unused funds in an HSA at the end of the year are not forfeited; they roll over and continue to accumulate, providing for long-term savings,” wrote Michael Most, principal wealth manager at Savvy Advisors, in an email. But with an FSA, in 2026, the maximum amount you can carry over to the following year is $680, and not all FSA accounts have the rollover feature.
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What Can You Purchase With a Health Care FSA?
Once you’ve set up your FSA and funded the account, get ready to spend. You can use the cash in your account for a wide range of health care expenses, including:
— Prescription drugs and many over-the-counter medications
— Co-payments and deductibles
— Dental and orthodontic visits
— First aid items
— Medical devices such as wheelchairs, crutches and braces
— Hearing services and products
— Vision services and products
— Menstrual care products
— Acupuncture, physical therapy and chiropractic care
— Necessary mental health care
— Addiction treatment
— Baby products, such as diapers, breast pumps and monitors
— Reproductive health products and fertility treatment
Because all of these products and services will be paid for out of an FSA with pretax dollars, they are effectively discounted by the percent of income tax you would have paid.
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FSA Expiration and Grace Period
If your FSA is not eligible for a rollover, the funds in the account may expire if you don’t use them. For this reason, it’s important to carefully budget your contributions and make a plan to use what you save.
“Any funds remaining in FSAs at the end of the plan year (or grace period if offered by employer) may be forfeited, with some alternatives such as a carryover provision or a grace period,” Most says. That means that if you don’t use up the money you saved by the end of the year, you could lose it entirely.
According to Lei Han, certified public accountant and associate professor of accounting at Niagara University in New York, most employers offer a grace period of up to two and a half months to use the money in your FSA after the year ends. This grace period gives you a little extra time to spend down the funds so you don’t lose them.
Before you sign up for an FSA benefit or deposit any money into the account, know what you’re getting into. If you’re at all unsure, ask your human resources department to explain the details involved in the plan.
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Tips for Managing Your FSA
The potential forfeiture of FSA funds can complicate budgeting. You’ll need to determine the appropriate amount to save in these accounts before you start contributing, and then use the money prudently.
Most recommends aiming low to avoid making unnecessary purchases just to use up leftover money at the end of the year.
“It’s better to be conservative and slightly underestimate your expenses rather than overestimate and risk losing a portion of your funds by the plan year’s end,” he says.
Han suggests using your previous year’s medical expenses to guide your spending in the new year. This approach can be especially useful for those with chronic medical conditions who regularly spend on medical supplies and procedures and can count on those costs coming up again in the future.
When leveraged correctly, an FSA can help you save on health care by allowing you to allocate pretax money toward those purchases. The key is to plan carefully so you can avoid losing any cash.
If you have lingering funds, review the list of items you can buy with the account and stock up on the things you need. This may be the perfect time to buy a pair of eyeglasses or replenish your first aid kit.
More from U.S. News
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Health Saving Accounts and Medicare: Using an HSA to Pay for Medicare Premiums
Use Your Health Care FSA Balance Before It Expires originally appeared on usnews.com
Update 03/05/26: This story was published at an earlier date and has been updated with new information.