If you put money into a health flexible spending account (FSA) this year, some of it may disappear on Jan. 1.
Not because you did anything wrong. Because that’s how the rules were written. Whatever you don’t use by the deadline, beyond any carryover your plan allows, is forfeited.
For 2026, the IRS lets you steer up to $3,400 of pretax pay into a health FSA. If your plan allows a carryover, the most you can bring into 2027 is $680, according to the IRS.
Run the numbers. Say you elected the full $3,400 and have spent only half. On a carryover plan, you keep $680 and lose $1,020. On a plan with no carryover and no grace period, you lose the entire $1,700.
That’s your own paycheck, handed back for nothing.
I’ve been a CPA since 1981, and I can’t think of many tax breaks that punish procrastination this hard. You’ve got until your plan year ends. Here’s what I’d do in that time.
1. Find out which deadline you’re facing
Before you buy a single bottle of aspirin, find out what kind of plan you have. Your employer picks one of three setups:
- Carryover: Up to $680 of unused 2026 money rolls into next year. Your plan is allowed to set a lower cap.
- Grace period: You get up to 2½ extra months after the plan year ends to spend the money — for a calendar-year plan, that’s about mid-March.
- Neither: Whatever’s left when the plan year ends is gone.
Your employer isn’t required to offer either option, and it can’t offer both, according to HealthCare.gov.
Your benefits portal or plan summary will say which you have. While you’re there, confirm your plan year actually ends Dec. 31. The deadline follows the plan year, not the calendar.
2. Book the appointments now — the date of service is what counts
Here’s the rule that trips people up: Your FSA pays for care you receive during the plan year, not care you pay for. FSAFEDS, the program for federal workers, says an expense becomes eligible when the service is provided during your benefit period.
So prepaying for January doesn’t work. FSAFEDS notes that IRS rules bar reimbursing expenses you haven’t incurred yet.
A dental cleaning on Dec. 29 counts against 2026. The same cleaning on Jan. 6 doesn’t, unless your plan has a grace period.
According to IRS Publication 502, eligible care includes teeth cleanings, X-rays, fillings and eye exams. Your FSA can also cover deductibles and copays, according to HealthCare.gov.
December calendars fill up fast. If you’ve been putting off a checkup, call this week.
3. Buy the glasses or contacts you’ve been squinting without
This is the easiest way to spend a few hundred dollars that’s about to vanish.
Eyeglasses and contact lenses you need for medical reasons count, and so do the supplies to use them, like saline and lens-cleaning solution, per Publication 502.
A spare pair of prescription glasses for the car. A year’s supply of contacts instead of three months. Things you’d buy eventually anyway, paid for with pretax dollars instead of after-tax ones.
Real talk — I’ve made plenty of money mistakes in my life, and I’ve spent decades helping people sidestep the ones they don’t have to make. Sign up for the free Money Talks Newsletter and let my scars save you a few of your own. Free, and worth more than that.
4. Stock the medicine cabinet, prescription or not
Over-the-counter medicine and menstrual care products are covered FSA expenses, whether or not a doctor prescribed the medicine, according to IRS Publication 969. Pain relievers, allergy pills, cold remedies, tampons and pads all fit.
That’s been true for OTC drugs since January 2020, thanks to the CARES Act, according to FSAFEDS.
Here’s the CPA footnote: If you itemize, you generally can’t deduct nonprescription drugs (insulin is the exception), per Publication 502. Your FSA is the better route for that stuff.
One limit: Products for everyday wellness or appearance don’t qualify, FSAFEDS says. Your FSA isn’t a beauty budget.
5. Refill prescriptions and pick up medical supplies
If you take a maintenance drug, fill it before the plan year runs out. FSAFEDS counts a prescription as received on the day the pharmacist fills it.
If the price at the counter is what’s really hurting, you can look for a cheaper way to fill your prescriptions before you pay.
Publication 502 also lists everyday supplies that qualify: bandages, crutches, blood sugar test kits, and hearing aid batteries.
Keep every receipt. Your plan needs documentation from a third party, like the pharmacy or provider, before it pays, according to Publication 969.
6. Set your 2027 election using this year’s leftovers
Open enrollment season is when you fix the real problem of electing more than you spend.
Your employer’s enrollment materials will show its 2027 cap. The IRS posts the federal limit on its tracking page each fall; if 2027’s isn’t up yet, plan around 2026’s $3,400.
Base your election on costs you can predict: glasses, dental work, regular prescriptions and copays. Premiums don’t count.
The payoff is real. If your taxable income is above $50,400 as a single filer or $100,800 if you’re married filing jointly, you’re in at least the 22% federal bracket for 2026.
At that rate, $3,400 run through an FSA can save you up to $748 in federal income tax. No Social Security or Medicare tax comes out of it, either.
There’s another perk: The whole annual amount is yours to use from the first day of the plan year, even before you’ve paid it in, per Publication 969. That’s handy if you know a big bill is coming early in the year.
Don’t confuse this with a health savings account, or HSA. An HSA requires a high-deductible plan, and its money stays put until you use it — no forfeit.
If your plan choices are changing too, it’s worth reading up on how to compare employer health plans before you click “renew.”
Bottom line
Your plan may give you extra time after the plan year ends to file claims for this year’s expenses. For federal workers in FSAFEDS, it’s April 30, 2027 for 2026 expenses. Check yours — missing that deadline forfeits money you already spent.
But the care itself has to happen by your plan’s deadline. For a calendar-year plan without a grace period, that’s Dec. 31.
So pull up your balance today. Book the appointment, buy the glasses, fill the prescription. And while you’re working down your year-end list, check whether a Roth conversion could use up room in your 2026 tax bracket.
Money you set aside for your health shouldn’t be forfeited because the calendar ran out.
Add a Comment