Whether your FSA rolls over depends on your employer's plan. An FSA (flexible spending account) is an account you fund with pre-tax pay to cover health or dependent care costs. By default, unused money is lost at the end of the plan year. This guide shows which rule your plan likely has, your 2026 deadlines, and what to buy before time runs out.
This page is general information, not tax or legal advice. Your employer's plan document sets your exact rules.
Does an FSA roll over to the next year?
A health FSA rolls over only if your employer's plan includes a carryover or a grace period. Without either one, unused money is forfeited when the plan year ends. FSAs are offered through a Section 125 cafeteria plan, a written employer plan that lets employees pay for benefits with pre-tax pay. The Section 125 cafeteria plan guide explains how those plans work.
Find your plan type below. Your benefits portal, FSA card website or Summary Plan Description will say which rule applies.
| Your plan has | What happens to unused money | 2026 money deadline (calendar-year plan) |
|---|---|---|
| Carryover | Up to $680 moves into 2027. Anything above $680 is lost | Spend by Dec 31, 2026. Up to $680 carries forward |
| Grace period | The full balance stays usable for 2.5 more months | Spend by March 15, 2027 |
| Neither | All unused money is lost | Spend by Dec 31, 2026 |
| Dependent care FSA | No carryover. A grace period is possible | Usually Dec 31, 2026 |
A carryover works like unused phone data that rolls into next month, but with a cap. A grace period works like a store that stays open a little longer after closing time.
Key facts:
- A health FSA can offer a carryover or a grace period, not both, under IRS Notice 2013-71.
- The carryover cap from 2026 into 2027 is $680, set by IRS Revenue Procedure 2025-32.
- A run-out period is extra time to submit old receipts. A run-out period is not extra time to spend.
- Dependent care FSAs cannot carry over money. The One Big Beautiful Bill Act set the dependent care limit at $7,500 per household starting in 2026.
How does the FSA carryover work?
An FSA carryover lets up to $680 of unused 2026 health FSA money move into the 2027 plan year, if your plan allows it. IRS Revenue Procedure 2025-32 sets the $680 cap, and your employer can choose a lower cap. Under IRS Notice 2020-33, the cap is 20% of the yearly health FSA limit, so it rises when the limit rises.
- Carryover money does not count toward the new year's limit. You can still elect the full amount for 2027 on top of the carryover.
- Some plans require you to re-enroll in the FSA for the new year to keep carryover money. Check this during open enrollment.
- The carryover cap applies again each year, so balances do not keep building up.
Example: You elected $2,000 for 2026 and spent $1,100, so you have $900 left. Your plan allows the full carryover. $680 moves to 2027. The other $220 is lost unless you spend it by December 31, 2026.
The FSA grace period vs carryover guide compares both options side by side.
How does the FSA grace period work?
An FSA grace period lets you spend leftover money on expenses you have after the plan year ends, for up to 2 months and 15 days. IRS Notice 2005-42 sets that limit. For a calendar-year plan, the grace period ends March 15, 2027.
The full remaining balance stays available during a grace period, not just $680. That is the main difference from a carryover.
What is the FSA run-out period?
The FSA run-out period is time after the plan year ends to send in receipts for things you already bought. The run-out period does not give you more time to spend. Your plan sets the length, and 60 to 90 days is common.
| Can you buy new things? | Yes | No |
|---|---|---|
| Can you submit old receipts? | Yes | Yes |
| Typical length | Up to 2.5 months | Often 60 to 90 days |
Miss the run-out deadline, and even money you already spent correctly can be lost.
What should I buy with my FSA before December 31?
Buy care and supplies you would use anyway, and submit every receipt. This December checklist covers the most common FSA-eligible spending:
- Log in and check your balance. Note your plan's rule: carryover, grace period or neither.
- Find your deadlines. Write down your last spending date and your claim deadline.
- Book care you need anyway. Dental cleanings, eye exams, physicals, physical therapy or a counseling visit.
- Refill prescriptions. Many plans allow a 90-day supply before year-end.
- Buy glasses, contacts or prescription sunglasses.
- Stock up on FSA-eligible items. Since the CARES Act of 2020, over-the-counter medicine and menstrual care products qualify without a prescription. First aid supplies, broad-spectrum sunscreen (SPF 15 or higher), reading glasses, thermometers and blood pressure monitors are also commonly eligible. IRS Publication 502 lists eligible medical expenses, and IRS Publication 969 explains FSA rules. Check your FSA administrator's eligible list too.
- Submit every receipt before the run-out deadline.
- Set your 2027 election during open enrollment based on what you spent this year.
Only buy what you will use. Overbuying to avoid a small forfeiture can cost more than it saves.
Does an FSA roll over if I leave my job?
No. An FSA does not move to a new employer, and unused money is generally lost when you leave. Coverage usually ends on your last day or the end of that month.
Leaving can also work in your favor. Under the uniform coverage rule, you can spend your full annual election at any time during the plan year, even before it has all come out of your paychecks. If you leave after spending more than you contributed, you generally do not pay the difference back. The health FSA uniform coverage rule guide explains the details. In some cases your employer must offer COBRA continuation for the FSA, so ask before your last day.
Can a carryover affect my HSA?
Yes. A carryover into a general health FSA can block you from contributing to an HSA (health savings account) in the new year. Many plans fix this by moving the carryover into a limited-purpose FSA, which covers only dental and vision. Ask your employer before January 1.
IRS Revenue Procedure 2026-24 sets the 2027 HSA limits at $4,500 for self-only coverage and $9,000 for family coverage. The HSA vs FSA guide compares the two accounts.
Does a dependent care FSA roll over?
No. A dependent care FSA (DCFSA) cannot carry over money, although a plan may offer a grace period. The dependent care limit is $7,500 per household for 2026 and 2027, or $3,750 if married filing separately, under the One Big Beautiful Bill Act. A DCFSA pays for daycare, after-school care, summer day camp and similar care that lets you work. The dependent care FSA limit guide covers the $7,500 increase.
Where does forfeited FSA money go?
Forfeited FSA money stays with your employer's plan. The employer can use forfeitures to cover plan costs or return them to all participants on an equal, uniform basis. Forfeited money cannot be paid back to you based on your own unused balance.
How much should I put in my FSA for 2027?
Base your 2027 FSA election on what you spent this year, plus costs you already know are coming.
- Start with this year's spending, not a guess.
- Add known 2027 costs, such as braces, a planned procedure, new glasses or regular prescriptions.
- If your plan has a carryover or grace period, you can lean a little higher. If it has neither, stay conservative.
- The IRS has not released the official 2027 health FSA limit yet. Benefits industry projections expect $3,500, with a $700 carryover into 2028. The 2026 limit is $3,400 under IRS Revenue Procedure 2025-32. The health FSA contribution limit guide will reflect the official number.
Every dollar you put in an FSA skips federal income tax and the 7.65% FICA tax. At a 22% federal bracket, $2,000 in an FSA saves about $593 a year ($2,000 x 29.65%). The FICA tax savings guide shows the employer side of the same math.
Who sets up FSA carryover and grace period rules for employers?
The employer chooses carryover, grace period or neither in the Section 125 plan document, usually with help from a plan administrator. Summit Health Benefits sets up and runs Section 125 plans, including health FSAs and dependent care FSAs, for small and mid-size employers.
A carryover keeps money in play all year and is easier to explain. A grace period works well for teams that spend in bursts. Either one cuts forfeiture complaints and helps more employees enroll.
Summit Health Benefits charges $35 per enrolled employee per month (PEPM). The fee is paid out of the employer FICA savings the plan creates, so employers typically still net about $56 to $101 per enrolled employee per month.
Estimate My 2027 SavingsSet Up an FSA Your Employees Will Actually Use
A Summit Health Benefits advisor explains carryover and grace period options, sets up your health and dependent care FSAs inside a Section 125 plan, and estimates your FICA savings.
Frequently Asked Questions
Does an FSA roll over to the next year?
How much FSA money can roll over into 2027?
Can an FSA have both a carryover and a grace period?
Does a dependent care FSA roll over?
Does an FSA roll over to a new employer?
What is the FSA run-out period?
What is the 2027 FSA limit?
What happens to forfeited FSA money?
Sources
- Internal Revenue Code Sections 125 and 129
- IRS Notice 2013-71 and IRS Notice 2020-33 (health FSA carryover)
- IRS Notice 2005-42 (grace period)
- IRS Revenue Procedure 2025-32 (2026 health FSA limit of $3,400 and $680 carryover)
- IRS Revenue Procedure 2026-24 (2027 HSA limits)
- IRS Publication 969 and IRS Publication 502 (eligible expenses)
- CARES Act of 2020 (over-the-counter medicine and menstrual care products)
- One Big Beautiful Bill Act of 2025 (dependent care assistance limit of $7,500)