If you have a flexible spending account through work, there's a decent chance you're sitting on hundreds of dollars that will simply evaporate if you don't act before December 31.
Unlike a bank account, an FSA doesn't roll over indefinitely.
Use it or lose it, as the saying goes, and most employers mean it literally.
Here's the frustrating part: this isn't your money in any normal sense.
You funded the account with pre-tax dollars, which means you agreed to let your employer hold it in exchange for a tax break.
The trade-off only pays off if you actually spend the balance on eligible expenses before the clock runs out.
The good news is that a lot of people have more runway than they think.
Federal rules allow employers to offer either a grace period of up to 2.5 months into the next year or a carryover of up to $640 for 2024 (the figure is adjusted annually for inflation).
You have to check your own plan documents, because your coworker's setup may not match yours.
So where does the money typically go to die?
First, people assume only doctor visits count.
In reality, most FSAs cover a long list of everyday items: prescription glasses and contacts, bandages, heating pads, sunscreen with SPF 15 or higher, menstrual products, pregnancy tests, and even some over-the-counter medications if your plan allows them without a prescription.
Second, people wait until the last week of December, then panic-buy things they don't need.
That's how you end up with a closet full of ankle braces.
A smarter move is to schedule that dental cleaning or eye exam you've been putting off, or refill a year's worth of a prescription you know you'll use.
Third, some folks forget that dependents count.
If you have a child in braces or a spouse with a chronic condition, those expenses can absorb a balance fast.
There's also a real risk worth naming here: the companies that profit from this system.
FSA administrators and employers benefit when workers forfeit balances, because unused funds typically stay with the employer.
That's a quiet incentive working against you, which is exactly why you should treat the deadline like a bill that's due.
Don't buy medical items you can't use before they expire, and don't assume every purchase will be reimbursed.
Keep your receipts, submit claims on time, and confirm eligibility with your plan administrator rather than a random internet list.
Rules vary, and rejected claims are your problem, not theirs.
If you're nowhere near spending the balance and the deadline is days away, call your administrator and ask two questions: Is there a grace period or carryover, and what's the exact deadline for submitting claims versus incurring expenses?
Those dates aren't always the same, and people get burned by that difference every year.
The bottom line is that an FSA rewards planning and punishes delay.
Check your balance today, not on December 30.
If you still have money left, book the appointment, fill the prescription, or buy what you'll genuinely use.
Final Thoughts
Letting it lapse isn't a tax strategy; it's a donation to your employer's bottom line.