There's a deadline looming that most Americans ignore until it's too late, and it can quietly cost them hundreds of dollars.
It's the end of your flexible spending account plan year, and any money you haven't spent by the cutoff generally disappears.
Unlike a savings account, an FSA is a use-it-or-lose-it arrangement.
You elect a set amount during open enrollment, the money comes out of your paycheck pretax, and then you have to spend it on eligible expenses before the deadline.
Miss it, and the balance typically reverts to your employer.
For 2024, the IRS capped employee contributions at $3,200 per person.
That's real money sitting in an account that many workers forget about until December, when they scramble to book eye exams, refill prescriptions, or stock up on contact lenses.
The rules aren't as simple as a single date, and that's where people get tripped up.
Your plan year might end December 31, but your employer can offer a grace period of up to two and a half months, pushing your real deadline into mid-March.
Some employers instead offer a carryover, letting you roll a limited amount into the next year.
The catch: you typically get a grace period or a carryover, not both, and it depends entirely on how your specific plan is written.
Here's the part that catches people off guard.
If you're in a health care FSA, you can usually use the full amount you elected on day one, even before you've contributed all of it.
But a dependent care FSA works differently, and you can only spend what you've actually put in.
Doctor visits, dental work, glasses, prescription meds, and many over-the-counter items now qualify without a prescription.
Think bandages, allergy pills, and even some menstrual products.
What doesn't count: cosmetic procedures, gym memberships in most cases, and vitamins bought purely for general health.
If you're staring down a balance with days to go, there are legitimate ways to spend it fast.
Schedule that dental cleaning you've been putting off.
Get new prescription glasses or a backup pair.
Buy eligible OTC supplies you'll actually use rather than random items you'll never touch.
One warning worth repeating: don't panic-buy things you don't need just to zero out the account.
That defeats the purpose of saving on taxes in the first place.
Dependent care FSAs have their own quirk.
The money can cover day care, after-school programs, and summer camp, but you have to claim it as you incur the expense.
The contribution limit for 2024 is $5,000 per household, or $2,500 if you're married and filing separately.
The smartest move is to log into your benefits portal today, not in late December.
Confirm three things: your exact deadline, whether you have a grace period or carryover, and your current balance.
Then map out which eligible expenses you can realistically knock out.
If you chronically overestimate how much you'll spend, adjust your election next open enrollment.
Aim for a number you're confident you'll use, not the maximum just because it's there.
A slightly smaller contribution you fully spend beats a bigger one you partly waste.
The bottom line is that an FSA is a tax break with an expiration date, and treating it like a set-and-forget account is how people lose money.
Final Thoughts
A ten-minute check now can save you a few hundred dollars you'd otherwise hand back for nothing.