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Money left in a health FSA at the end of the plan year is usually gone. The IRS calls the default the use-or-lose rule, and for a calendar-year plan the money you set aside in 2026 has to cover expenses incurred in 2026. Whatever remains after the deadline goes back to the plan. You do not get a check, and it does not quietly roll into next year on its own.
Two exceptions exist, and your employer picks at most one of them. Knowing which one your plan has, and the exact dollar cap, is the difference between spending your balance on glasses in December and losing it.
Option one: the carryover
If your employer offers the carryover, up to $680 of your unused 2026 health FSA balance moves into 2027. That figure comes from IRS Revenue Procedure 2025-32, and it is 20% of the 2026 contribution limit of $3,400. Carryover money does not expire at the end of the following year in the way people fear; it can be used for expenses across the plan year it lands in, and a fresh carryover can happen again the next year. The catch is the cap. If you have $1,100 left and your plan carries over $680, the other $420 is forfeited. The carryover also does not count against next year’s $3,400 contribution limit, so you can still elect the full amount.
Option two: the grace period
The other design gives you time instead of dollars. A grace period extends the window to incur new expenses by up to two and a half months past the plan year end. For a calendar-year plan that means March 15, 2027 to use up your 2026 balance, on top of whatever run-out period your plan allows for submitting claims for expenses you already incurred. Employers cannot offer both the carryover and the grace period for a health FSA. IRS Notice 2013-71 closed that door when it created the carryover. And an employer is allowed to offer neither, in which case December 31 is a hard stop.
Dependent care FSAs are a separate account with separate rules. They can have a grace period, but the health FSA carryover does not apply to them. The dependent care limit also changed for 2026, rising to $7,500 per household under recent legislation. Do not mix the two balances in your planning.
How much to elect in the first place
The cleanest way to avoid a forfeiture is to size the election to expenses you are nearly certain about: prescriptions you refill monthly, planned dental work, orthodontia payments, therapy copays, glasses or contacts. For 2026 you can elect up to $3,400. Electing the maximum because the tax savings look good, then scrambling to spend $900 in late December, usually ends with buying things you did not need, which is worse than paying tax on the income would have been.
Remember the timing quirk that catches new enrollees: your full annual election is available from the first day of the plan year, even though contributions come out of each paycheck. A $2,400 election means $2,400 of reimbursable expenses in January, funded by deductions that have barely started. The reverse risk lands when you leave a job mid-year, because access to the account generally ends with your coverage, and unspent money stays behind unless you elect COBRA for the FSA itself in the narrow cases where that is offered.
FSA or HSA money: do not confuse the deadlines
None of these deadlines apply to an HSA. HSA balances roll over every year with no cap, and the account belongs to you. If you have both accounts, usually an HSA paired with a limited-purpose FSA for dental and vision, spend the FSA money first because it is the money with the expiration date. Our HSA vs FSA comparison covers which account saves more in different situations, and the 2026 HSA contribution limits are worth checking if you are deciding how much to put in each account. To find your FSA rule, read your summary plan description and look for the words carryover or grace period. If neither word is there, plan to spend the balance down before your plan year ends.
