If you set aside money in a flexible spending account this year, there's a decent chance you're about to donate part of it to your employer.
Unlike a bank account or even an HSA, an FSA comes with a hard spending deadline, and the clock is running out on 2024 balances.
Most FSA plans require you to spend the money by December 31, though some employers offer a grace period until March 15 or allow you to carry over a limited amount into next year.
That carryover figure is capped by the IRS at $640 for 2024, and not every plan permits it.
If yours doesn't, whatever is left simply vanishes.
This use-it-or-lose-it structure is the trade-off for the tax break.
You fund an FSA with pre-tax dollars, which lowers your taxable income and effectively gives you a discount on eligible purchases.
For a household in the 22% bracket, $1,000 set aside costs about $780 in real take-home pay.
The catch is that you're betting on your own future medical needs — and plenty of people guess wrong.
According to the Employee Benefit Research Institute, participants forfeit hundreds of millions of dollars in unused FSA funds every year.
It's real money that evaporates because a receipt got lost or a dental appointment got postponed.
The eligible expense list is longer than most people assume.
Prescription medications qualify, as do glasses, contacts, and prescription sunglasses.
So do bandages, heating pads, blood pressure monitors, sunscreen with an SPF of 15 or higher, and even some over-the-counter allergy and cold medicines if your plan allows OTC purchases.
Menstrual products became eligible in 2020.
So did breast pumps and lactation supplies.
If you've been putting off a crown, a filling, or a cleaning, your FSA can cover it — and December is a great time to schedule it, since many dental offices have year-end openings as patients cancel.
Vision is another easy win: an extra pair of glasses or a year's supply of contacts can absorb a surprising chunk of a leftover balance.
First, FSA funds can't be used for insurance premiums, cosmetic procedures, or gym memberships unless a doctor specifically prescribes them.
Second, you generally can't use the card for a spouse's or dependent's expenses unless they qualify as a tax dependent.
Third, if you're planning a big purchase, the FSA store or your plan's website is the safest place to verify eligibility before you buy — an ineligible item can trigger a reimbursement denial months later.
If your deadline is December 31, book appointments now.
Providers fill up fast in the last two weeks of the year, and a December 30 call usually ends in a January appointment you can't use.
One more thing worth checking: some employers offer a run-out period in early 2025 for submitting claims for 2024 expenses, which is different from a grace period for incurring new ones.
Those are two separate deadlines, and mixing them up is a common and expensive mistake. **Our take:** FSAs reward people who plan and punish people who don't, which is a strange way to run a benefit program.
Final Thoughts
But the tax savings are real, so treat the deadline like a bill you owe — because technically, you already paid it.