If you have a flexible spending account through your job, there's a decent chance you're about to hand free money back to your employer.
Most FSA plans run on a calendar year, which means any balance left over at midnight on December 31 can vanish — and the average forfeited amount is real money, not pocket change.
You elect to set aside pre-tax dollars, the money comes out of your paycheck in equal chunks, and you spend it on eligible medical or dependent care costs.
The catch is the "use it or lose it" rule baked into federal law.
Unlike an HSA, which rolls over year after year, an FSA generally doesn't follow you into January.
There are two safety valves, and they're easy to miss.
Your employer can offer a grace period of up to 2.5 months, letting you spend last year's balance until mid-March.
Or it can allow a carryover of up to $640 into the next plan year.
Many plans offer one or the other — some offer neither.
The only way to know is to check your plan documents or call your benefits administrator.
If you're staring down a leftover balance, the final weeks of the year are the time to act.
Glasses and contacts are classic year-end buys, and an eye exam plus a new pair of frames can absorb a few hundred dollars fast.
Dental work counts too, so that crown you've been putting off is suddenly worth scheduling.
Sunscreen, bandages, pregnancy tests, and many over-the-counter medicines qualify, and since the CARES Act you no longer need a prescription for most of them.
Retailers like Amazon, Walmart, and Walgreens run dedicated FSA storefronts that flag eligible items, which saves you from guessing at the register.
For dependent care FSAs, the rules are tighter.
You can only claim expenses for kids under 13 or a dependent who can't care for themselves, and the care has to be work-related.
Prepaying a babysitter or after-school program for January can work if you get the timing and documentation right, but check with your administrator first.
One warning worth repeating: don't buy stuff you'll never use just to zero out the balance.
Loading up on random vitamins is worse than forfeiting a few dollars.
And if your balance is small, remember that the tax savings you already captured may outweigh the loss.
Log into your FSA portal this week, check your exact balance and your plan's rollover rules, and book any appointments before providers fill up for the holidays.
The bottom line: an FSA only pays off if you treat the deadline like a bill that's due.
Final Thoughts
Ten minutes of checking your balance now beats watching hundreds of dollars evaporate while you're distracted by holiday shopping.