An FSA generally cannot be used for previous year expenses. Reimbursement turns on the date you received the service, not the date you were billed or paid, so a doctor’s visit in December 2024 has to come out of your 2024 FSA, and your 2025 or 2026 account cannot touch it. A few plan features — the run-out period, the grace period, and the carryover — give you some flexibility around the plan-year boundary, but none of them let a new year’s FSA pay for an old year’s service.
The Date-of-Service Rule
Every FSA claim lives or dies on one date: the day you actually received the medical care or dependent care. The IRS treats an expense as “incurred” when the service is provided, not when you get the bill, submit the claim, or make a payment.1Internal Revenue Service. Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans
In practice, a procedure performed on December 28 belongs to the plan year that includes December 28. If your new plan year starts January 1, your fresh FSA dollars cannot touch that December 28 expense. The reverse is also true. A service received on January 3 is a new-year expense, even if you still had leftover funds from the prior year that you were hoping to spend.
This catches people most often with bills that arrive weeks after treatment. You might get a statement in February for lab work done in November, assume your current FSA covers it, and file the claim, only to have it denied because the date of service predates your current coverage period. Check the date of service on every bill before submitting.
The Run-Out Period: Paying a Prior Year’s Bills After the Year Ends
The run-out period is the one mechanism designed for exactly this situation, but it is a paperwork deadline rather than an extension of coverage. After your plan year ends, most employers give you a window to submit claims for services you already received during that plan year. You cannot incur new expenses in this window; you can only file the paperwork for expenses whose date of service falls on or before the last day of the plan year.
Your employer sets the length of this window in the plan document. Run-out periods commonly last around 90 days after the plan year ends.1Internal Revenue Service. Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans So for a plan year ending December 31, you might have until late March to submit claims against that year’s balance, as long as every service date is December 31 or earlier.
Miss the run-out deadline and the money is gone. The plan administrator will deny any claim filed after the window closes, and the remaining balance is forfeited. If you had medical visits in the final months of the plan year, gather your receipts and Explanations of Benefits early rather than waiting until the deadline.
The Grace Period Does Not Reach Backward
A grace period gives you up to two and a half extra months after the plan year ends to incur new eligible expenses using leftover funds from the prior year.1Internal Revenue Service. Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans For a calendar-year plan ending December 31, this extends your spending window through March 15 of the following year. The grace period moves money forward: it lets you spend last year’s leftover balance on services received in those extra ten or so weeks.
It does not pull old expenses into a newer plan year. A service from November 2024 cannot be reimbursed with a grace period that runs from January through March 2026. Grace-period eligibility is still date-of-service eligibility; the only thing that changed is which pool of money is available to pay for services in that short window.
Carryover Moves Money Forward, Not Expenses Backward
The carryover lets a set amount of unspent funds roll into the next plan year. For the 2026 plan year, the maximum carryover amount is $680.2FSAFEDS. FSAFEDS Message Board – 2026 Benefit Period Your employer can set a lower limit but not a higher one. Carried-over dollars add to your new plan year’s available balance and can be used for any eligible expense incurred during that new year. The carryover amount does not reduce how much you can elect to contribute in the new year.1Internal Revenue Service. Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans
Like the grace period, the carryover does not retroactively cover old expenses. It just moves leftover money forward so you can spend it on future services. Any unused balance beyond the $680 carryover ceiling is still forfeited, and federal rules prohibit offering both a carryover and a grace period for the same health FSA, so your plan will have one, the other, or neither.3Internal Revenue Service. Notice 2020-33 – Section 125 Cafeteria Plans Modification of Permissive Carryover Rule Check your plan documents or ask your benefits administrator which option applies to you.
What Happens to Money You Can’t Use
When FSA money is forfeited under the use-it-or-lose-it rule, it does not vanish. The funds go back to the employer’s plan. If the plan is governed by ERISA, which covers most private-sector employers, forfeited amounts are plan assets and must be used for the benefit of participants rather than kept by the employer. Common uses include reducing future employee contributions on a uniform basis, offsetting plan administration costs, or increasing coverage amounts for the following year.4Internal Revenue Service. Notice 2013-71 – Modification of Use-or-Lose Rule For Health Flexible Spending Arrangements The employer cannot allocate forfeited money back to specific employees based on how much each person forfeited, because that would effectively undo the use-it-or-lose-it rule.
The practical takeaway: once a prior year’s run-out deadline passes, there is no path to recover that money as cash or roll it into a new account. The dollars stay with the plan.
The Orthodontia Exception
Orthodontia is one of the few areas where the rigid date-of-service rule bends. Because braces involve a single upfront payment covering treatment that spans months or years, many FSA plans reimburse orthodontia based on the payment date rather than the dates of each adjustment visit. The federal employee FSA program, for instance, allows reimbursement for prepaid orthodontia expenses during the benefit period when the payment was made, regardless of when future services will occur.5FSAFEDS. FSAFEDS Orthodontia Quick Reference Guide
Not every plan handles orthodontia the same way. Some require you to submit claims as each monthly payment comes due; others reimburse a lump sum upfront. If your child is getting braces, confirm your plan’s specific orthodontia reimbursement policy before making a large payment, since the answer affects which plan year’s funds you draw on and how much you should elect.
Documenting the Date of Service
Because the date of service decides everything, your documentation has to show it. The IRS requires that FSA substantiation come from an independent third party and show three things: a description of the service or product, the date of service, and the amount charged.6Internal Revenue Service. CCA 202317020 – Claims Substantiation for Payment or Reimbursement of Medical and Dependent Care Expenses A credit card receipt or bank statement alone will not work, because it lacks the service description and specific service date.
An itemized statement from your provider or an Explanation of Benefits from your insurance company meets the requirement. For expenses that straddle plan years, read each line item on the EOB carefully. A single statement might cover services from both December and January, and only the services with eligible dates can be claimed against each respective plan year’s balance. If you have a late-year service and expect the bill to arrive after the new year, ask the provider for an itemized receipt at the time of service so you can file against the correct year without waiting.