FSA and HSA money at year end: what expires, what does not, and what counts

How the health FSA deadline works

A health flexible spending arrangement lets you set aside pre-tax salary for eligible medical expenses. The IRS describes FSAs as use-it-or-lose-it plans: money left at the end of the plan year generally cannot be carried into the next year.

Many plan years run on the calendar year, but not all. If your employer's plan year starts in July, for example, your deadline is in June. Check your plan documents or benefits portal for the exact dates, including any run-out period for submitting claims for expenses you already incurred.

The two exceptions, and why you cannot assume you have one

The IRS allows an employer's plan to soften the rule in one of two ways.

A grace period lets you incur new expenses for up to two and a half months after the plan year ends and pay them from last year's balance. A carryover lets you move a limited amount of unused money into the next plan year. For plan years beginning in 2026, the IRS maximum carryover is $680, and a plan may set a lower cap. Anything above the cap is forfeited.

A plan that offers a carryover cannot also offer a grace period for a health FSA. Many plans offer neither. The only way to know is to check your plan.

An HSA is not an FSA

A health savings account is available only if you are covered by a high-deductible health plan and meet other IRS conditions. The difference that matters at year end is simple: HSA balances carry over from year to year with no deadline, and the account stays with you if you change employers or leave the workforce.

There is no reason to rush HSA spending in December. Some people prefer to let the balance grow and pay current costs out of pocket. You can generally make contributions for a tax year up to that year's federal filing deadline; for example, 2025 contributions could be made through April 15, 2026.

What counts as an eligible medical expense

FSA and HSA funds can be used for medical care as the IRS defines it: costs primarily to diagnose, treat or prevent a disease or condition. Costs that are merely beneficial to general health do not qualify. The IRS's guidance on nutrition and wellness spells out several distinctions.

• Lab fees that are part of medical care are generally eligible.
• Weight-loss programs qualify only when they treat a specific disease diagnosed by a physician, such as obesity, hypertension or heart disease.
• Nutritional supplements and vitamins qualify only if a medical practitioner recommends them to treat a specific diagnosed condition.
• Gym memberships and general wellness costs usually do not qualify.
• Wearables qualify only if used primarily to diagnose or treat a specific disease, not for general tracking.
• Over-the-counter drugs and menstrual care products are eligible for HSA and FSA reimbursement.

Why diagnostics are a sensible year-end use

If you have FSA money that would otherwise be forfeited, an expense with clear medical value is a better use than stocking up on items you do not need. Lab testing ordered by a clinician to evaluate symptoms or risk factors is one example many people overlook. A continuous glucose monitor, when prescribed to evaluate blood sugar, may be another, depending on your plan.

HealifyMD's comprehensive lab panel is $199, and a continuous glucose monitor is $189 (one 14-day sensor, clinician visit included). Whether either is reimbursable depends on your plan administrator's rules, so check before you buy and keep your receipts and any clinician documentation.

Letters of medical necessity

Some administrators ask for a letter of medical necessity for expenses that could be either medical or general wellness, such as a weight program or a supplement. The letter, written by a clinician, explains the diagnosed condition and why the item treats it. If your plan requires one, ask your clinician whether it is appropriate in your case; a letter cannot make a non-medical expense eligible.

The hedges, which are not optional

• This page is general information, not tax or legal advice.
• Your plan's rules can be narrower than IRS rules.
• Ask your plan administrator before you spend, especially on anything unusual.
• Keep itemized receipts showing the date, service and amount.