If you have a flexible spending account (FSA), you might be staring down a “use-it-or-lose-it” deadline as the year draws to a close. FSAs are a great way for employees to save money on a pre-tax basis for medical or dependent care expenses, helping mitigate some of those inevitable costs. But, unlike health savings accounts (HSAs) that you pair with high-deductible health plans—HSAs that, fortunately, don’t have spending deadlines—FSAs require a bit more attention.
A significant number—around 70%—of FSA account holders have until December 31 to use up the funds in their accounts, according to data from FSA Store, a retailer specializing in products eligible for FSA spending. Rachel Rouleau, the chief compliance officer at FSA Store, advises those with leftover funds to consult with their HR department or directly review their plan to confirm if they have that year-end deadline.
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In some cases, FSAs offer a grace period extending up to two and a half months past the end of the plan year—taking you into March 15, 2025—to use available funds. Other plans might let you roll over as much as $640 from this year into the next. It’s worth noting, however, that not all accounts accommodate these options, so double-check your plan specifics.
If neither grace periods nor rollovers apply, Rouleau says, it’s crucial to be vigilant about using your funds before December 31. In 2024, the threshold for contributions to a health care FSA can go up to $3,200. Typically, families tuck away an average of $2,250 annually in FSA accounts, with $1,820 coming from personal contributions and the remaining $430 from employer contributions, based on market research from Numerator.
How can you best use your FSA funds? Well, dental and vision care lead the way, with 67% using them in such a manner. Prescription medications also see significant use at 65%, along with various medical procedures and services, accounting for 64%. Some plans offer what’s known as a “run-out period,” giving you an extra three months post-year-end to submit for reimbursement. However, remember that eligible spending needs to be completed by the final day of the year.
Moreover, FSAs can cover a broad range of over-the-counter health products. Items like acne treatments, pain relievers such as Tylenol, or allergy medications like Claritin typically qualify, according to Rouleau.
While many items are reimbursable, not everything automatically fits the bill. Nicole DeRosa, a CPA and tax director at SKC & Co. CPAs in Boonton Township, New Jersey, recommends referring IRS Publication 502 to verify if certain expenses qualify for FSA reimbursement. Surprisingly, quite a few expenses qualify, sometimes ones you might not expect. For instance, the upkeep for service dogs, like food and grooming, is covered, although this doesn’t extend to emotional support animals. Generally, weight loss programs and cosmetic procedures aren’t covered unless they’re medically necessary as prescribed by a doctor.
As we flip our calendars to 2025, don’t feel you need to wait to start spending your future FSA balance—you can get a jump on it from the outset. “You don’t have to wait for each paycheck or for a balance to build,” DeRosa mentions. “Be proactive—go ahead and begin utilizing those funds right away.”
