If you have a flexible spending account through work, there is a decent chance you are about to forfeit money you already earned.
Most FSAs run on a calendar-year clock, which means the funds typically vanish on December 31.
It is the actual rule baked into federal law.
Here is the part that trips people up: your employer gets to choose how generous your plan is.
Some offer a grace period until March 15.
Some allow you to roll over a limited amount into next year.
The contribution limit for 2025 sits at $3,300 per employee, and a family can stack a dependent care FSA on top of that.
That is real money sitting in an account with an expiration date.
Glasses, contacts, dental work, therapy copays, prescription refills, and a long list of over-the-counter items all qualify.
Since 2020, menstrual products and many OTC medicines no longer require a prescription to be reimbursed.
If you have been putting off a dental cleaning or a new pair of prescription sunglasses, this is the week to schedule it.
Watch out for the deadline trap that catches smart people.
A purchase made on December 31 does not automatically count.
What matters is the date the service was rendered, not the date you paid.
Buy a pair of glasses on January 2 and you may be out of luck even if the exam happened in December.
Check your plan documents before you assume anything.
There is also a quieter risk that costs people more than the forfeiture itself.
Retailers know FSA money burns a hole in pockets every December.
That is why you see sudden promotions on "FSA eligible" gadgets, massage guns, and dubious wellness devices.
Plenty are marked up, low quality, or simply not eligible, and you find out when the claim gets denied in February.
The dependent care side deserves its own warning.
If you use a daycare or after-school program, you generally cannot claim expenses until the care has actually been provided.
Prepaying next year's tuition in December to drain the account often does not work, and some plans reject it outright.
Read the fine print or call your administrator before you write that check.
Then there is the uncomfortable question nobody asks at open enrollment: who benefits from you overfunding this account?
Your employer does, at least in the short term.
Unused FSA balances stay with the company, which can use them to offset the cost of administering the plan.
That is not a conspiracy, but it is worth remembering when HR cheerfully reminds you to "maximize your tax savings" every fall.
If you are staring at a balance with days to go, do not panic-spend on junk.
Book the dental visit, fill the prescriptions, stock up on contacts, and submit receipts immediately rather than letting them pile up.
If your plan has a grace period, confirm the exact end date in writing.
If it does not, treat December 31 like a hard wall.
The honest take: FSAs are a tax break wrapped in a deadline, and the deadline usually wins.
Most people would come out ahead contributing less and forfeiting nothing rather than chasing a deduction they never fully use.
Final Thoughts
Treat the account as a spending plan, not a savings account, and you will stop donating your own money back to your employer.