Health FSA Deadline: Use-It-or-Lose-It and 2026 Limits

Many employers run open enrollment and plan-year deadlines this fall, so it is a good time to learn how your plan treats leftover money. This post explains the IRS rules in plain terms. It is general information, not advice for your situation, and your employer's plan document controls the details.

The 2026 numbers

The 2026 figures come from IR-2025-103 and Revenue Procedure 2025-32. The 2025 figures are in the IRS HSA and FSA guide, Publication 969.

The IRS says the carryover limit is a ceiling. A plan may set a lower maximum carryover amount, so your plan could allow less than $680.

How use-it-or-lose-it works

Publication 969 describes FSAs as generally "use-it-or-lose-it" plans. Amounts in the account at the end of the plan year can't generally be carried over to the next year. The plan can provide for one of two exceptions:

• A grace period. The plan may allow up to 2½ months after the end of the plan year. During that time, qualified medical expenses you incur can be paid from the amounts left over from the prior year. Your employer is not permitted to refund any part of the balance to you.
• A carryover. The plan may let you use a limited amount of unused money for qualified medical expenses you incur in the following plan year. If the plan permits it, any unused amounts above the carryover amount are forfeited. The carryover does not change the maximum amount you can elect to contribute.

A plan that adopts the carryover is not permitted to also provide a grace period for the health FSA. The IRS points to Notice 2013-71 for that rule.

Plan year dates come from your employer

The IRS rules talk about the "plan year," not the calendar year. Health FSAs are employer-established plans, and many are offered as part of a cafeteria plan, so the plan year can be different from the calendar year. Look in your plan documents or benefits portal for the plan year end date, the grace period or carryover terms, and any deadline for submitting claims. Claim-submission deadlines are set by the plan.

How contributions and reimbursements work

Publication 969 explains the basics:

• You choose an amount at the beginning of the plan year, and your employer withholds it from your pay, often every payday. You can change the election only if the law and the plan allow it.
• You don't pay federal income tax or employment taxes on the salary you contribute.
• You can use the FSA for qualified medical expenses even if the money has not yet been credited, because you can generally receive the full amount you elected at any time during the coverage period.
• Reimbursements generally must be for qualified medical expenses incurred during the coverage period, and you need a statement from an independent third party showing the expense and amount.
• Self-employed people are not eligible for FSAs.

What an FSA can and cannot pay

Qualified medical expenses are those specified in the plan that would generally qualify for the medical and dental expense deduction. The IRS says over-the-counter medicine and menstrual care products count as medical care. Expenses for you, your spouse, your dependents and your child under age 27 at the end of the year can generally be covered.

According to Publication 969, you can't take distributions from the FSA for health insurance premiums, long-term care, or amounts covered under another health plan. You also can't deduct on Schedule A any qualified medical expenses that equal the reimbursement you received from the FSA. Publication 502 explains the medical expense deduction.

FSAs and HSAs

If you have a high-deductible health plan, the FSA you choose matters. The IRS says an employee covered by an HDHP and a health FSA that pays or reimburses qualified medical expenses generally can't contribute to an HSA. There are exceptions. You can contribute to an HSA while covered by an HDHP and certain arrangements, such as a limited-purpose health FSA or a post-deductible health FSA.

The grace period has its own HSA rule. The IRS says coverage by a general-purpose health FSA during a grace period is allowed only if the balance in the health FSA at the end of the prior plan year is zero. If you are sorting out the choice during open enrollment, our post on the 2027 HSA contribution limits has the HSA side, and the HSA tax deduction page explains how the deduction works.

Before the plan year ends

A few steps are procedural and worth doing: find your current balance, read the plan's grace period or carryover terms, and gather receipts for qualified expenses. The year-end tax planning checklist lists other items to review, and the tax terms explained page defines words like "adjusted gross income" that show up in benefit decisions.

Because plan terms differ, your plan administrator has the last word on your account. For the federal rules, confirm everything in Publication 969, IR-2025-103 and Revenue Procedure 2025-32 from the sources list.

Sources

Figures, dates and rules in this post were checked against these official pages on October 18, 2026. Open them to confirm the current numbers before you act.

• IRS: Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans
• IRS: Tax year 2026 annual inflation adjustments (IR-2025-103)
• IRS: Revenue Procedure 2025-32, 2026 cafeteria plan amounts (PDF)
• IRS: Notice 2013-71, Modification of use-or-lose rule for health FSAs (PDF)
• IRS: Publication 502, Medical and Dental Expenses