Don't Forfeit Your Health FSA: The $3,400 Limit, $680 Carryover and Year-End Checklist
You open your Health FSA portal on December 10 and see $740 left; in the worked example below (assumed numbers, not a forecast), that balance costs you $60 on a carryover plan or $240 on a grace-period plan. Which outcome applies depends on your plan's rules and on three clocks: when your spending has to happen, when your claims have to be filed, and when your reimbursement gets processed. If you have an unspent balance late in the plan year, your first job is to find out when each of those three clocks stops in your plan.
Here is the structure behind that. Money in a Health FSA can pay for eligible medical expenses, but only inside windows your plan sets. When those windows close, an unspent balance is forfeited, apart from whatever a carryover protects. My read: a balance that looks harmless in October could become a December problem if you wait until the last week to learn which rules your plan uses.
| Clock | What it controls | Example for a calendar-year plan |
|---|---|---|
| 1. Spending | The last day you can receive care or buy an eligible item | Dec. 31, 2026. A grace-period plan adds up to 2.5 months (Dec. 31 + 2.5 months = March 15, 2027) |
| 2. Filing (run-out) | The last day to submit claims for expenses that already happened | Set by your plan; check your plan documents |
| 3. Reimbursement | How quickly a submitted claim is processed and paid | Varies by administrator; check your plan documents |
This article gives no standard figure for Clock 3, because processing time depends on your administrator. A claim filed on the last possible day could leave no time to answer a request for more documentation, so treat the filing deadline as the outer limit rather than your target. Also check which date your plan uses for an expense (the day of service or purchase, or the day you pay), because that date determines which side of Clock 1 the expense lands on.
The 2026 rules in one place
The IRS set the 2026 Health FSA contribution limit at $3,400 and the maximum carryover at $680. Both figures are as of Oct. 21, 2026, and both come from IRS Rev. Proc. 2025-32, section 4.15. The 2025 figures are included for comparison.
| Health FSA | 2025 | 2026 (as of Oct. 21, 2026) |
|---|---|---|
| Contribution limit | $3,300 | $3,400 |
| Maximum carryover | $660 | $680 |
The two caps answer different questions. The contribution limit is the most you can put in for the year, and the carryover cap is the most that can move forward at year-end. Year over year, the limit rose $100 and the carryover cap rose $20 ($3,400 - $3,300 = $100; $680 - $660 = $20). These are the federal figures. Your employer's plan document is the final authority on what your plan allows, and its cap could be lower than the IRS maximum, so confirm your own number before you plan around $680.
Carryover or grace period, not both. A plan can offer a carryover or a grace period, and it cannot offer both (IRS Notice 2013-71). A carryover lets you move up to $680 of unspent money out of this plan year and into the next one. A grace period gives you up to 2.5 months after the plan year ends to spend what is left. Carryover protects a fixed dollar amount, while a grace period protects whatever you manage to spend in the extra window. Your plan document tells you which feature your plan has, if either.
Run-out is a filing window, not a spending window. The run-out period extends only the time to submit claims for expenses that already happened. It does not allow new spending (IRS Notice 2013-71). Think of it as extra time to hand in homework you have already finished: it gives you no time to do more of it. My read: the filing window is easy to mistake for extra spending time, so write the two dates down separately. Your plan sets the run-out length, so look it up in your plan documents before December ends.
An HSA is a different account with different rules — see our HSA guide — and this article covers the Health FSA only.
The December spending checklist: three tiers
Use this list to decide what to book before your spending window closes. The second column points to a category in IRS Publication 502, which covers medical and dental expense deductions. Pub 502 is an itemized-deduction standard, so the final FSA decision belongs to your plan administrator. Treat that column as a reference, not a ruling, and confirm with your administrator before you spend.
Tier 1: Reliable picks. These are the straightforward categories, and the ones to book first.
| Tier 1 item | Pub 502 category (reference only) |
|---|---|
| Prescription drugs | Medicines |
| Insulin | Medicines (insulin) |
| Bandages | Bandages |
| Blood glucose meters | Diagnostic devices |
| Prescription glasses and lenses | Eyeglasses; contact lenses |
| Dental care | Dental treatment |
| Hearing aids | Hearing aids |
| Breast pumps | Breast pumps and supplies |
| Menstrual products | Check your plan's eligible-expense list |
| Over-the-counter medicines | Check your plan's eligible-expense list |
If you are short on time, start here. Dental and vision appointments could be hard to book in the last week of December, so calling now gives you room. Refills and over-the-counter purchases need no appointment, which could make them a quick way to close a small gap such as the $60 in the carryover example below, though your pharmacy or insurer could limit early refills.
Tier 2: Paperwork first. These can qualify when you can show a medical purpose, so line up the proof before you pay.
| Tier 2 item | Pub 502 category or IRS guidance (reference only) | Line up before you pay |
|---|---|---|
| Vitamins and supplements | Nutritional supplements | A clinician's written recommendation tied to a specific condition |
| Wearables | IRS medical expense FAQ, Q15 | A medical professional's recommendation or diagnosis that supports a specific medical purpose |
| Special foods | Your administrator decides | Clinician documentation of the medical need, plus the administrator's answer in writing |
| Weight-loss programs | Weight-loss program | Documentation that the program is treating a medical condition |
My read: Tier 2 is where year-end buying could go wrong. A late-December purchase without documentation could be denied after the spending window has closed, leaving no time to replace it with an eligible expense.
Tier 3: Skip these. These generally do not qualify as Health FSA expenses.
| Tier 3 item | Pub 502 category (reference only) | Why it generally fails |
|---|---|---|
| General groceries | Not a medical expense category | Ordinary food is a personal expense |
| Supplements for general nutrition | Nutritional supplements | No specific medical condition behind the purchase |
| Procedures done for appearance | Cosmetic surgery | The purpose is cosmetic, not treatment |
| General child care | Not a medical expense category | It is care, not medical treatment |
If a Tier 3 item is something you would buy anyway, pay for it yourself and keep the FSA balance for Tier 1 and documented Tier 2 expenses. Dependent care is handled by a separate account, the Dependent Care FSA, described in the sidebar below.
Reader math: what a $740 balance costs you
This is rule-of-thumb arithmetic with assumed numbers, not a forecast. Assume you have $740 left on December 10 and incur no other eligible expense before the plan year ends.
| Step | Case A: carryover plan | Case B: grace-period plan |
|---|---|---|
| Balance at plan-year end | $740 | $740 |
| What protects your money | Carryover of up to $680 | Eligible spending in the grace period (assumed: $500) |
| Dollar math | $740 - $680 = $60 forfeited | $740 - $500 = $240 forfeited |
| Percent math | $60 ÷ $740 × 100 = 8.1% | $240 ÷ $740 × 100 = 32.4% |
The chain runs like this. Event: the plan year ends with $740 unspent. Transmission: your plan's rule decides what is protected, up to $680 under a carryover or the $500 you assumed to spend under a grace period. Wallet impact: $60 or $240 forfeited.
Dollar math and percent math give different intuitions, so check both. Dollar math shows what you can still fix: in Case A, spending $60 more on eligible items before the plan year ends brings the loss to $0 (($740 - $60) - $680 = $0). Percent math shows how exposed the account is: the table puts Case A at 8.1% and Case B at 32.4%. In this example, the gap comes from the assumed $500 rather than from either plan type being better. If you spend the full $740 during the grace period, Case B also forfeits $0 ($740 - $740 = $0).
Timeline for the example (calendar-year plan)
- Dec. 10, 2026: the balance is $740 (assumed).
- Dec. 31, 2026: the plan year ends. Case A moves $680 forward and forfeits $60.
- Up to March 15, 2027 (Dec. 31 + 2.5 months): Case B's grace period ends. With $500 of assumed spending, $240 is forfeited.
- Run-out deadline: set by your plan, and the last day to file claims for expenses that already happened.
Your version. Let B be what is left in your account at the end of the plan year after you subtract every eligible expense you have incurred by then, filed or not.
- Carryover plan: Forfeited = B minus your carryover cap (up to $680 for 2026). If the result is negative, you forfeit $0.
- Grace-period plan: Forfeited = B minus your eligible spending during the grace period. If the result is negative, you forfeit $0.
- Plan with neither feature: Forfeited = B, which would be the full $740 in the example.
- Share of balance lost (percent math) = Forfeited ÷ B × 100.
- Extra spending needed to avoid any loss: on a carryover plan, today's balance minus your cap; on a grace-period plan, your whole remaining balance, spent by the end of the grace period.
To close a gap, fill it with Tier 1 purchases first and documented Tier 2 purchases next. Tier 3 purchases generally do not qualify, so they do not close it.
If you change jobs, your balance may not follow you
As a rule, an unspent Health FSA balance is forfeited when you leave your employer. Exceptions exist, and COBRA continuation is one general example, but whether any exception applies depends on your plan and your situation. My read: until your administrator confirms otherwise, treat your last day of work as the end of your spending window, and run the reader math above with that date in place of the plan-year end.
As soon as you learn your last day, ask your administrator for three things: the last date an expense can count after you leave; whether you can still file claims after your last day, and for how long; and whether any continuation option, such as COBRA, applies to your Health FSA. Write the answers down next to your plan-year dates.
Receipts and the wearables question
Keep one claim file per purchase, and make it complete enough that a reviewer could follow the story without calling you.
- An itemized receipt showing the date, the seller or provider, what you bought and what you paid.
- Any prescription tied to the item.
- For Tier 2 items, the clinician's recommendation or diagnosis note.
- Your claim confirmation, so you can show when you filed.
A card statement may not show what you bought, so on its own it could fall short if your administrator asks for proof. Your plan administrator or a tax professional can tell you how long to keep these records.
Wearables get their own paragraph because the IRS addressed them in Q15 of its medical expense FAQ (updated Sept. 23, 2026, as of Oct. 21, 2026). The gist: eligibility turns on the full facts and circumstances, the device's primary purpose has to be the diagnosis, treatment or prevention of a specific medical condition, and you need a basis for that purpose, such as a medical professional's recommendation or diagnosis. This article does not name any device as eligible or ineligible, and the FAQ's own wording is the final reference, so read Q15 before you buy. My read: a wearable bought for general fitness or wellness is the weakest fit for that test, while a device a clinician recommended for a diagnosed condition has the stronger paper trail. Neither is a guarantee, and your plan administrator decides.
Sidebar: the Dependent Care FSA is a separate account
The $3,400 and $680 figures in this article apply to the Health FSA only. If your employer also offers a Dependent Care FSA, the 2026 limit there is $7,500 as of Oct. 21, 2026, or $3,750 if you are married and file separately. The One Big Beautiful Bill Act (OBBBA) raised that limit, the first increase since 1986, and the new amount is not indexed to inflation. It is a different account with its own rules, so check that plan's documents separately.
Save this: the year-end Health FSA checklist
- Name your plan type. Find out whether your plan has a carryover (up to $680) or a grace period (up to 2.5 months), if either, and write down your plan-year end date.
- Get your dates and your balance. Note your plan-year end, your grace-period end if you have one, your run-out filing deadline and your exact balance. Your benefits portal, plan document or administrator's help line is the place to look.
- Know your number. Run the formula: Forfeited = year-end balance minus what your plan protects.
- Spend on Tier 1 first. Prescriptions, dental care, glasses, hearing aids and over-the-counter medicines can close a gap while the spending clock is running.
- Document Tier 2 before you pay. Get the clinician's recommendation or diagnosis note in hand, and ask your administrator first.
- File early and keep the file. Submit every claim well before the run-out deadline and store itemized receipts in one folder.
Know your plan type, know your number, and spend before the spending clock stops. Next action: open your FSA portal today and write down your balance and your plan-year end date.
Caveats and sources
- Plan rules vary. Plan years and deadlines differ by employer plan, and your plan year may not match the calendar year. Your plan document is the final authority on dates, caps and eligible expenses.
- Not tax advice. This article is general information. Your plan administrator or a tax professional can speak to your situation.
- Dates. Figures are as of Oct. 21, 2026, and IRS guidance can change after that date.
- Sources. IRS Rev. Proc. 2025-32, section 4.15; IRS Notice 2013-71; IRS medical expense FAQ, Q15 (updated Sept. 23, 2026); the One Big Beautiful Bill Act (Dependent Care FSA limit); IRS Publication 502, Medical and Dental Expenses; IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.
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