FSA Rollover: How Carryover Works

Short answer

FSA carryover is a rule that lets you roll unused money from your plan year into the next year, up to a cap set by the IRS. For 2026, you can carry over up to $680, then spend it during the next plan year. Not all plans offer carryover. Some plans instead offer a grace period, a short window after the plan year ends where you can spend the prior year's leftover balance.

Carryover and grace period are mutually exclusive: a plan must choose one or the other, not both. The key difference is timing. Carryover moves the money to next year. A grace period gives you extra weeks in the current year to spend what's left. For comparison: HSA balances roll over automatically every year with no cap and no deadline. HSA money is different from FSA money.

The carryover rule and account types

The FSA requires that unused money remaining at the end of your plan year must be forfeited. However, the IRS permits plans to adopt an exception: carryover. A plan that adopts carryover lets you keep part of the unused balance and spend it in the following plan year. The IRS allows a health FSA to pay or reimburse participants for "qualified medical expenses incurred during the following plan year". That original cap was $500. The IRS has since raised it. For 2026, "the maximum carryover amount is $680, an increase of $20 from tax years beginning in 2025".

Carryover applies only to FSAs (Flexible Spending Accounts) and dependent care FSAs. HSA balances work differently: Publication 969 states that "amounts that remain at the end of the year are generally carried over to the next year", with no cap or deadline. HSA money rolls over automatically. HRA (Health Reimbursement Arrangement) carryover is governed by your employer's plan design, not a federal cap.

The dates: plan year, grace period, run-out period, and carryover

Your FSA plan year is defined by your employer, typically the calendar year (January through December), though some employers use a different fiscal year. At the end of your plan year, any money not spent must either be forfeited or, if your plan adopts carryover, rolled to the next year (up to the $680 cap). Several rules govern what happens after the plan year ends, and which one applies to you depends on your plan document.

Plan year end date

This is when your FSA plan year officially ends. For most employees, it's December 31. Check your summary plan description to confirm.

Run-out period

A run-out period is "a period immediately following the end of a plan year" when you can still submit a claim for expenses incurred during that plan year. This is separate from carryover and grace period. The run-out period is purely for processing claims on expenses you already paid for during the plan year that just ended. It typically lasts 90 days to 6 months, but your plan document sets the exact window. You can't spend new money during the run-out period. You can only claim reimbursement for prior expenses.

Carryover option (if your plan offers it)

If your plan adopts carryover, any unused balance up to $680 for 2026 rolls into the next plan year automatically. You can then spend that carryover balance during the new plan year on new eligible expenses. Any amount that exceeds $680 is forfeited. IRS guidance is clear that the carryover amount doesn't reduce your salary reduction limit for the next year. This means the $680 sits on top of your next year's elected contribution.

Grace period option (if your plan offers it instead)

Some plans offer a grace period instead of carryover. A grace period is a short window, up to 2 months and 15 days, after the plan year ends during which you can spend any remaining balance from the prior year. For example, if your plan year ends December 31 and you have a grace period, you may be able to spend that balance through mid-March of the following year. The balance itself doesn't roll to next year. Instead, you get extra time in the current year to use it. Importantly, a plan can't offer both carryover and grace period. IRS guidance is explicit that a carryover plan "is not permitted to also provide a grace period with respect to health FSAs".

How to find out if your plan offers carryover

Your plan's carryover or grace period rules are written into your employer's summary plan description (SPD) or plan document. These are the official rules that govern your FSA. Your plan administrator may also publish them online or in your benefits portal.

Where to look

• Your employer's benefits handbook or summary plan description. This document is required to spell out all rules, including carryover and grace period.

• Your plan administrator's website. If your employer uses a third-party FSA administrator, log in to your account portal and look for plan rules, policy documents, or a FAQ section.

• Your employer's HR or benefits team. Call or email them with a simple question: Does our FSA plan offer carryover? Or a grace period? What is the deadline and the cap?

What the plan document will say

Look for language about "carryover," "grace period," or "run-out period." The document states the exact dollar cap, which is up to $680 for carryover in 2026. It also gives the dates the window opens and closes, plus any conditions. Some plans specify both the run-out period and a carryover cap. Others mention only one. If you can't find any mention of carryover or grace period, your plan follows the standard rule with no rollover option.

What to do with a balance before it expires

Once you know whether your plan offers carryover or a grace period, you can decide what to do with any unused balance. The smartest approach is to plan your spending so you use the balance intentionally rather than letting it expire.

Before the plan year ends (no carryover or grace period)

If your plan doesn't offer carryover or grace period, any balance remaining at the end of your plan year is forfeited. To avoid losing money, claim reimbursement for any expenses you paid out of pocket during the year. Expenses must have been incurred (the service delivered or product purchased) within the plan year, even if you paid or claimed reimbursement later. For example, if you had a doctor's visit on December 15 and paid out of pocket, you can file a claim for that visit even if you submit the paperwork in January.

During a grace period window

If your plan offers a grace period, you have extra time after the plan year ends (typically through mid-March) to claim reimbursements or make new purchases with the prior year's balance. This is your chance to spend down a remaining balance on eligible items. Many people use this time to stock up on FSA-eligible items like glasses, hearing aid batteries, or FSA-eligible OTC medicines.

If your plan offers carryover

You don't have to spend the carryover balance immediately. Any unused money (up to $680 in 2026) automatically rolls to the next plan year, and you can use it to pay for eligible expenses throughout the year. This is especially useful if you had an unexpected year of high medical spending and want to carry forward a cushion.

Getting it reimbursed with Burst

If what you're buying needs a letter of medical necessity, Burst writes it and files the claim. $35 once, about two minutes to request, reviewed by a licensed clinician, typically in your inbox within 24 hours. Burst files the reimbursement claim with your FSA, HSA or HRA administrator, and the administrator pays you out of your account by deposit or check. No letter, no charge. Claim denied, money back. The letter has to be dated on or before the purchase it covers, so request it before you buy.

Request my letter for $35

Frequently asked questions

What is the FSA carryover limit for 2026?

The maximum FSA carryover for 2026 is $680, set by the IRS. Any unused balance above that amount is forfeited unless your plan offers a grace period instead.

Can my plan offer both carryover and a grace period?

No. A plan must choose one or the other. IRS guidance forbids plans from offering both carryover and grace period at the same time.

How long is the grace period?

The grace period is up to 2 months and 15 days after the plan year ends. Your plan document sets the exact end date. For example, if your plan year ends December 31, the grace period might end on March 15.

If I carry over $680 into next year, does it reduce my new contribution limit?

No. The carryover sits on top of your next year's contribution limit. If your limit is $3,400 for 2026, and you carry over $680, you can contribute up to $3,400 in 2026 and also spend the $680 carryover separately.

What happens to money I don't spend during the grace period?

If you don't spend the balance by the end of the grace period, it is forfeited. The grace period is your final window to spend prior-year FSA money.

Can I file a claim after my plan year ends?

Yes, if your plan offers a run-out period. Your plan allows claims for expenses incurred during the plan year even after the year ended, as long as you file within your plan's run-out period window (typically 90 days to 6 months). Check your plan document for the exact deadline.

What is the difference between carryover and a grace period?

Carryover rolls the unused balance into the next plan year so you can spend it over the next 12 months. A grace period gives you a short window (up to 2.5 months) after the current plan year ends to spend the prior year's balance. The balance doesn't roll to next year. You're just getting extra weeks to use it in the current year.

Keep reading: FSA Grace Period Deadline, How Much to Contribute to Your FSA, FSA Deadline 2026: What to Buy, and all guides on this topic.

Sources

• IRS Notice 2013-71 (FSA carryover, grace period, requirement to forfeit unspent FSA balance, carryover vs. grace period exclusivity, run-out period definition)

• IRS newsroom: tax inflation adjustments for tax year 2026 (2026 FSA carryover maximum of $680)

• IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans (HSA carryover (automatic, no cap))