Dependent Care FSA funds do not roll over from one plan year to the next. Whatever sits in the account after the plan year ends is forfeited to your employer, with one narrow exception: if your employer’s plan includes a grace period, you get up to two months and 15 days of extra time to spend the leftover money on new eligible care. There is no carryover provision, no cash-out, and no way to move the balance into next year’s election.
The Use-It-or-Lose-It Rule in Plain Terms
A Dependent Care FSA lives inside your employer’s Section 125 cafeteria plan. You elect an annual contribution during open enrollment, the money comes out of your paycheck before federal income tax and payroll taxes are calculated, and you draw on it to pay for care that lets you and your spouse work. The tax break comes with a hard condition: spend the money on qualifying care during the plan year, or lose it.
For 2026, the household contribution ceiling is $7,500, or $3,750 if you’re married and filing separately. That cap is set by Section 129 of the Internal Revenue Code and applies no matter how many dependents you have. If both you and your spouse have Dependent Care FSAs through separate employers, the combined contributions still cannot exceed $7,500.
Any balance left after the plan year and any applicable grace period reverts to your employer. You can’t cash it out, you can’t convert it into another benefit, and you can’t push it into the following year’s account. The IRS treats the forfeiture as final.
The Grace Period Is the Closest Thing to a Rollover
Some employers add a grace period of up to two months and 15 days after the plan year ends. On a calendar-year plan, that gives you until March 15 of the following year to incur new eligible care expenses using the prior year’s leftover funds. This is the nearest a Dependent Care FSA gets to a rollover, and it only exists if your plan document specifically provides for it.
During the grace period you’re spending old money on new expenses. If your plan year ended December 31 with $1,200 sitting in the account, you can use that $1,200 to pay for daycare in January or February. Once March 15 passes, anything still in the account is gone.
Not every employer offers a grace period. There is no legal requirement to provide one, so check your benefits handbook or ask HR. If your plan doesn’t include a grace period, the deadline to incur eligible expenses is simply the last day of the plan year.
Why Health FSA Carryover Rules Don’t Apply
If you’ve heard that FSA money can carry over, you’re thinking of a health FSA. The IRS allows health FSA plans to let participants carry up to $680 of unused funds from 2026 into 2027. That provision was introduced in IRS Notice 2013-71 and applies exclusively to health FSAs. Dependent Care FSAs are excluded from it.
The distinction matters because many people assume the two accounts follow the same rules. They don’t. A Dependent Care FSA has two possible year-end outcomes: you spent the money on qualifying care, or you forfeited it. The grace period buys extra time to spend, but it does not change that binary. An employer that offers a grace period for the Dependent Care FSA also cannot offer a carryover for the health FSA in the same plan, and vice versa. It’s one or the other for each account type.
Grace Period vs. Run-Out Period
Most plans also include a run-out period, usually 60 to 90 days after the plan year ends. This is where people lose money they didn’t have to lose, because they confuse it with the grace period.
The two do different jobs. The grace period gives you extra time to incur new eligible expenses. The run-out period gives you extra time to file claims for expenses you already incurred during the plan year. If you paid for summer camp in July but never submitted the receipt, the run-out period is your window to get reimbursed. You cannot use the run-out period to pay for care that happens after the plan year ends.
Miss the run-out deadline and the money is forfeited even though the expense was legitimate. This is where most people forfeit balances unnecessarily. Not because they didn’t spend the money, but because they didn’t file the paperwork in time.
Where Forfeited Money Goes
Balances that expire go back to your employer. Federal rules allow the employer to use forfeited amounts to offset the administrative costs of running the plan or to reduce future contributions across participants. You have no claim on the money once it is forfeited, and the IRS does not permit any refund, rollover, or conversion.
How to Avoid Forfeiting a Balance
The most reliable protection is a conservative election. Estimate your actual care costs for the year, subtract any months when care might stop (school breaks, a child aging out mid-year), and set your contribution at or slightly below that number. Overestimating is how forfeitures happen.
If you realize mid-year that you’ve over-contributed and no qualifying life event has occurred, you’re locked into the election. But you can look harder for eligible expenses you might not have considered: summer day camps, before- and after-school programs, or a babysitter for evenings when both parents work late. Some families shift care spending they were already covering out of pocket over to the FSA-eligible category once they see a surplus building.
Track your plan’s specific deadlines. Know whether your employer offers a grace period, when the run-out period ends, and how far in advance the administrator needs claims to process them. A calendar reminder two months before the plan year ends has saved more FSA balances than any other single habit.
File claims as you go rather than in a year-end rush. Keep a running folder, digital or physical, of every receipt. Handwritten receipts and canceled checks without detailed service descriptions frequently get rejected, so ask your provider for an itemized statement if their standard receipt is thin. Your administrator will need the provider’s name and address, their Taxpayer Identification Number, and dates of service with amounts.
What Happens If You Leave Your Job
Leaving an employer mid-year creates a real risk of forfeiting your balance. Unlike a health FSA, COBRA continuation coverage generally does not apply to a Dependent Care FSA. When your employment ends, your ability to incur new eligible expenses through the account typically stops on your last day of work.
You can still file claims for care expenses you incurred before your termination date, usually within the plan’s run-out period. But if you’ve been contributing all year and leave in June, you may have several months of contributions sitting in the account with no way to spend them down.
Some employer plans include a termination spend-down provision that lets you keep incurring and claiming expenses through the end of the plan year after you leave. This is not required by law and many plans don’t offer it. If a job change is on the horizon, check your summary plan description before you finalize your contribution amount. Front-loading care expenses early in the year also helps, since a Dependent Care FSA only reimburses up to what you’ve contributed so far, and a surprise departure is easier to absorb when the balance is already spent.
When You Can Change Your Election
You’re generally locked into your annual contribution once open enrollment closes. The IRS allows mid-year changes only after a qualifying life event that directly affects your need for dependent care: a birth or adoption, marriage or divorce, a spouse starting or stopping work, a significant change in care cost or provider, or a dependent turning 13 and aging out. Most employers require you to request the change within 30 to 60 days of the event, and the adjustment has to match the event. You can’t cite a new baby as a reason to lower your election if costs are rising.
Used well, mid-year adjustments are the one tool that lets you correct an over-contribution before it becomes a forfeiture. Used late or not at all, they leave you with a balance the plan year cannot absorb.