Time Is Running Out to Use the Money in Your Flexible Spending Account
Do you have a flexible spending account (FSA) for your health care needs? If you do, here’s a friendly heads-up: You’d better check and see how much money is left in it. You’re starting to run out of time to spend it. Tick tock!
FSAs are “use it or lose it” accounts, so you lose any money you haven’t used by the end of the year. However, there is a grace period. So, if you get to the end of the year and have money to spend, the Internal Revenue Service (IRS) actually allows up to 2.5 months as a grace period. Your FSA plan will cover you through March 15, 2025.
More from The Penny Hoarder: Our 11 Top Picks for Best Savings Accounts
What’s a Flexible Spending Account, or FSA?
A flexible spending account lets you set aside pretax money for medical and dental care that insurance won’t cover. Employers take money out of paychecks to fund the accounts, which are regulated by the IRS. A third party usually administers the accounts and handles reimbursements.
This is important: An FSA is different from an HSA, a health savings account. An HSA is also a tax-advantaged account you and your employer can contribute to in order to pay for eligible medical expenses using pretax dollars.
The main difference? You can only establish an FSA with your employer. This means your employer — not you — owns your FSA account. If you leave your job, you lose your FSA funds.
The biggest advantage of an FSA is that all your funds are available immediately the day you enroll. Even though you haven’t paid in yet, the full contribution amount you elected during open enrollment is accessible to spend on health expenses at the beginning of the year.
In 2024, FSA account holders could set aside $3,200 for the year. In 2025, that amount jumps to $3,300.
The biggest drawback to an FSA is the “use it or lose it” factor, meaning you lose whatever money you don’t use up by the end of the year.
If FSA money is left in your account at the end of December, your employer can offer one of two options:
- A 2.5-month grace period to spend the leftover money.
- A carryover of up to $500 to spend the next plan year.
Or, your job can choose to terminate any remaining funds when a new year starts. It’s totally up to your employer. It’s not up to you.
Related: Insurance 101: How to Protect Yourself and Your Stuff
You’d Be Surprised What Your FSA Can Pay For
Most of us use our flexible spending accounts to pay for doctor visit copays or medications that aren’t completely covered by our health insurance.
But that’s not all your FSA is good for.
The IRS has a handy list of medical supplies and services covered by your FSA for preparing your tax returns.
You’ll find even more supplies when you search for FSA-eligible products and services at FSAStore.com or by searching for FSA-eligible products on Amazon.
Here’s a selection of stuff that you might not have known your FSA can pay for:
- Eyeglasses
- Contact lenses
- LASIK eye surgery
- Menstrual products
- Allergy testing
- Acupuncture, visits to an osteopath or tune-ups by a chiropractor
- Reproductive services for men and women, including sterilization, vasectomies, lactation expenses and fertility enhancement procedures
- Pregnancy test kits, birth control pills or post-mastectomy breast reconstruction
- Expenses for service animals, including training fees, pet food and veterinary care
Medical items of many kinds are covered… even sunscreen!
The Bottom Line
It may seem like the end of the year isn’t that close yet. But don’t wait until it’s too late.
Decide now how you want to spend the rest of your FSA money.
Use it. Don’t lose it.
Read on:
- Here’s How to Start Saving Money — Even If You Don’t Have Room in Your Budget
- 31 Ways to Make Money Online & From Home in 2024
- Our 11 Top Picks for Best Savings Accounts for November 2024
Mike Brassfield ([email protected]) is a former senior writer at The Penny Hoarder.
