Millions of American workers are about to lose money they already earned.
If you have a flexible spending account through your job, the clock is running out on the 2025 plan year — and this time the stakes are higher than usual.
Here's the catch that's catching people off guard.
For 2026, the IRS raised the health FSA contribution limit to $3,400, up $100 from last year.
If your employer offers a carryover, the maximum you can roll into next year is now $680 — up from $640.
That sounds generous until you realize a carryover only applies if your company actually offers one.
There are two very different rules, and mixing them up is how people get burned.
A carryover lets you move up to $680 of unused funds into the next plan year.
A grace period, by contrast, gives you extra months — typically until March 15 — to spend down last year's balance.
A few offer neither, which means any money left in the account on December 31 simply vanishes.
That last scenario is more common than you'd think.
Roughly a third of employers offer no carryover and no grace period, according to benefits industry surveys.
For a household that set aside $2,000 and spent $1,400, that's $600 gone — not taxed, not refunded, just forfeited to the plan administrator.
The good news: FSA dollars are unusually flexible about *what* they buy, as long as you buy it before the deadline.
You don't need a prescription for most over-the-counter items anymore, a change Congress made permanent a few years back.
That means bandages, pain relievers, cold medicine, allergy pills, sunscreen with SPF 15 or higher, contact lens solution, menstrual products, and pregnancy tests all qualify.
So do first-aid kits, thermometers, and even some acne treatments.
Then there's the "stock up" strategy that financial planners quietly recommend every December.
Need dental work or a new pair of prescription sunglasses?
Therapy, chiropractic visits, and acupuncture generally count too, as long as they're for a diagnosed condition.
One often-missed item: a dependent care FSA works differently.
That money can only be used for daycare, after-school programs, summer day camps, and similar childcare costs.
It has its own separate deadline, and it does not roll over the way health FSAs sometimes do.
If you're sitting on a balance and genuinely can't spend it, check whether your plan runs an FSA store — many administrators now host online shops where every item is pre-approved, so you don't have to guess at receipts.
You can also submit claims for expenses you already paid out of pocket earlier in the year, as long as you have the documentation.
One warning worth repeating: you cannot cash out an FSA.
There's no withdrawal option, no transfer to a retirement account.
Final Thoughts
Use it or lose it is the actual rule, not a scare tactic. **Our take:** An FSA is a great deal when you estimate your spending accurately and a lousy one when you guess high to "be safe." If you routinely forfeit a few hundred dollars each year, it's worth lowering your election next open enrollment — the tax savings rarely beat the money you're simply handing back.