Money in Flexible Spending Accounts Will Soon Evaporate

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It’s time to use it or lose it for many folks with flexible spending accounts, the tax-advantaged vehicles that help you pay for medical expenses.

Money in FSAs generally must be used within your health insurance plan year.

Employers are allowed — but not required — to offer one of two extensions of sorts, according to the federal government. But both are limited. Employers can:

  • Provide a “grace period” of up to 2 ½ extra months to use the money in your FSA.
  • Allow you to carry over up to $610 per year to use in the following year. explains:

“At the end of the year or grace period, you lose any money left over in your FSA. So, it’s important to plan carefully and not put more money in your FSA than you think you’ll spend within a year on things like copayments, coinsurance, drugs, and other allowed health care costs.”

What is a flexible spending account?

An FSA, generally offered through employers, is a type of tax-advantaged account that enables you to pay for eligible out-of-pocket health care costs with pre-tax earnings. That’s because you don’t pay taxes on the money you put into an FSA.

For tax year 2023, you can have up to $3,050 of your earnings placed in an FSA, according to the Internal Revenue Service. This contribution works similarly to how income is withheld from your paycheck to be invested in an employer-sponsored 401(k) account, for example.

Costs that can be paid out of an FSA include:

  • Copayments
  • Deductibles
  • Prescription medications
  • Over-the-counter medications with a doctor’s prescription (except for OTC insulin)
  • Medical equipment like crutches
  • Supplies like bandages
  • Diagnostic devices like blood sugar test kits


An FSA is not to be confused with a health savings account, or HSA. Both enable you to effectively pay for eligible health care expenses tax-free, but HSAs have a few other big benefits that FSAs lack.

For example, money in an HSA can be put in a savings or investment account, making HSAs similar to tax-sheltered retirement accounts like IRAs or 401(k)s. We detail this in “5 Reasons This Is the Best Type of Retirement Account.”

Another advantage of HSAs but not FSAs: As we note in “9 Ways to Maximize a High-Deductible Health Plan,” any money you put in an HSA remains in the account year after year if you don’t spend it.

However, to qualify for an HSA, your health insurance deductible must be relatively high. Such rules do not apply to an FSA.

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