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FSA Basics
Deadlines, carryover rules, grace periods, and what you can spend your FSA on in 2026.
What is an FSA?
A Flexible Spending Account (FSA) is an employer-sponsored benefit account that lets you set aside pre-tax dollars for qualified medical expenses. Unlike an HSA, an FSA does not require a high-deductible health plan — it works with most employer health plans including PPOs and HMOs.
Contributions reduce your taxable income, saving you 22–32% (or more) in federal taxes on every dollar you contribute. The 2026 contribution limit is $3,300.
The Critical Difference from HSA: Use It or Lose It
December 31 deadline
Most FSAs expire on December 31. Unspent funds are forfeited — not rolled over, not refunded. If your plan has no grace period or rollover, any money left in your account after December 31 is gone permanently.
Exceptions to the December 31 Deadline
Your employer may have adopted one of two exceptions:
Grace period (2.5 months)
Some plans extend the spending deadline to March 15, 2027. You can incur new expenses in January and February 2027 and pay for them with your 2026 FSA funds.
$640 rollover
Some plans allow up to $640 of unused funds to carry over to 2027 automatically. Anything above $640 is still forfeited on December 31. Plans cannot offer both a grace period AND a rollover.
Log in to your FSA administrator's portal and look for "Plan Details" or call member services to confirm which option your plan has.
2026 FSA Key Numbers
| 2026 contribution limit | $3,300 |
| Maximum rollover (if plan allows) | $640 |
| Grace period end date (if plan allows) | March 15, 2027 |
| Default deadline | December 31, 2026 |
| Dependent Care FSA limit | $5,000/household |
What Can I Buy With My FSA?
FSA-eligible expenses include everything covered under IRS Publication 502 as a qualified medical expense. Since the CARES Act of 2020, this includes all OTC medications without a prescription, plus menstrual care products (tampons, pads, cups, period underwear).
Common eligible categories: prescription drugs, doctor/dental/vision copays, contact lenses and solution, glasses, sunscreen (SPF 15+), first aid supplies, OTC medicines, TENS units, heating pads, blood pressure monitors, and more.
Not eligible: gym memberships, vitamins and supplements (without a specific medical prescription), cosmetics, teeth whitening, and general wellness items.
FSA vs. HSA: Which Is Better?
FSAs are available with any health plan — PPO, HMO, or otherwise. The full annual contribution is available on January 1, before you've actually contributed through payroll deductions, giving you immediate liquidity. The downside is the use-it-or-lose-it rule.
HSAs require an HDHP, but funds roll over indefinitely, the account is yours permanently, and you can invest the balance for long-term tax-free growth. If you can tolerate a higher deductible, the HSA is structurally superior.
Not tax advice
This page is for informational purposes only. Confirm your specific plan's rules with your FSA administrator. IRS rules change annually.