For the 2026 plan year, health FSA rollover rules let you carry up to $680 of unused funds into the following plan year, provided your employer’s plan actually offers the rollover option.1Internal Revenue Service. Revenue Procedure 2025-32 The rollover is one of two exceptions to the default “use-it-or-lose-it” rule that otherwise forfeits any money left in your account at year’s end. Employers can choose the rollover, choose a grace period instead, or offer neither, so the rules that apply to you depend on your specific plan document.
The Default: Use It or Lose It
Health FSAs operate under a use-it-or-lose-it rule built into Section 125 cafeteria plans. Any money sitting in your account when the plan year ends is generally forfeited back to the employer unless the plan specifically adopts an exception.2Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans The rollover is the exception that lets a portion of your balance survive that deadline.3Internal Revenue Service. Modification of Use-or-Lose Rule For Health Flexible Spending Arrangements (FSAs) Notice 2013-71
How Much You Can Roll Over
The IRS caps the health FSA carryover at $680 for the 2026 plan year, up from $660 in 2025.1Internal Revenue Service. Revenue Procedure 2025-32 Your employer can set a lower cap in its plan document but cannot exceed the IRS figure. An employer that permits carryover, for example, might limit it to $500.2Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans
If your leftover balance is larger than the cap, only the cap amount rolls forward. The rest is forfeited. Finish the plan year with $900 remaining and the plan allows the full IRS maximum? $680 carries into next year and $220 is gone.2Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans
How Rolled-Over Funds Work in the New Year
Carryover dollars are available immediately at the start of the new plan year. They also sit on top of your fresh election rather than counting against it. So if you roll $680 into 2026 and elect the full $3,400 salary reduction limit, you have up to $4,080 available for eligible expenses that year.1Internal Revenue Service. Revenue Procedure 2025-32
Rolled-over funds are treated as health FSA money and can be used for the same categories of qualified medical expenses your plan reimbursed the year before. There is no separate deadline for spending the carryover portion — it simply joins your new balance.
The Grace Period Is a Different Option
Employers cannot combine a rollover with a grace period on the same health FSA. They pick one, or they offer neither.3Internal Revenue Service. Modification of Use-or-Lose Rule For Health Flexible Spending Arrangements (FSAs) Notice 2013-71 If your plan uses a grace period instead of the rollover, the rules look very different.
A grace period extends your spending deadline by up to two and a half months after the plan year ends. For a calendar-year plan, that runs through March 15. During the grace period you can incur brand-new eligible expenses and pay for them with the prior year’s leftover balance. But anything still sitting in the account when the grace period closes is forfeited in full. No portion is preserved. The employer can shorten the grace period below the two-and-a-half-month maximum if the plan document says so.2Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans
The practical difference matters. A rollover saves a capped amount permanently. A grace period gives you more time but no safety net once it ends.
Dependent Care FSAs Don’t Get a Rollover
The carryover provision applies only to health FSAs. Unused dependent care FSA funds cannot roll into the next plan year no matter what your employer’s health FSA does.4FSAFEDS. Dependent Care FSA Carryover A dependent care FSA can still use a grace period if the employer includes one, giving you until March 15 (for a calendar-year plan) to incur eligible childcare or elder care expenses against last year’s balance.5FSAFEDS. FAQs – Dependent Care FSA
Because there is no rollover cushion for dependent care accounts, careful estimation of childcare costs matters even more than it does for a health FSA. The dependent care contribution limit is set by statute at $5,000 per household ($2,500 if married filing separately) and is not indexed for inflation.
What Your Employer Decides
Federal rules give employers three choices for a health FSA: adopt the rollover, adopt a grace period, or offer neither and let the use-it-or-lose-it default stand. Only one exception is allowed, and it has to be written into the official plan document.3Internal Revenue Service. Modification of Use-or-Lose Rule For Health Flexible Spending Arrangements (FSAs) Notice 2013-71
Even when the rollover is offered, the employer sets the cap within the IRS limit. So the practical answer to “how much can I roll over” is: whatever your plan document says, up to $680 for 2026. Your benefits enrollment materials or summary plan description should state which option applies and any employer-specific limit. If it isn’t clear, ask HR before open enrollment closes.
Forfeited funds do not disappear entirely from the plan. Employers can apply them to plan administration costs or credit them back uniformly to participants’ accounts the following year, as long as the credit isn’t tied to individual claims history.
Spending Down Before You Forfeit
The cleanest defense against forfeiture is a conservative election in the first place. If you overshoot and find yourself with a surplus late in the plan year, there are more eligible expenses than most people realize.
Over-the-counter medications are FSA-eligible without a prescription, including allergy medicine, pain relievers, cold and flu remedies, antacids, and first aid supplies. Sunscreen, reading glasses, contact lens solution, and menstrual care products also qualify. Dental cleanings, new eyeglasses, and physical therapy visits are common catch-up spends before a plan year closes.
Cosmetic procedures, gym memberships, and general wellness items like vitamins and supplements generally do not qualify. When in doubt, the baseline is the list of deductible medical expenses in IRS Publication 502 — that is what your FSA uses to define eligibility.
If your plan has the rollover, you have a small cushion and don’t need to spend every last dollar. If your plan only offers a grace period, start scheduling and stocking up well before the deadline, because appointments book out and claims take time to process. Waiting until the final week is how most forfeiture happens.