An FSA plan year is the 12-month cycle that controls when you can enroll in a Flexible Spending Account, how much you can put in, and when the money expires. For 2026, you can contribute up to $3,400 to a health care FSA and up to $7,500 per household to a dependent care FSA. Anything left in a health FSA at year-end above $680 is forfeited under the use-it-or-lose-it rule, unless your employer offers a grace period instead.
How the 12-Month Cycle Works
Federal regulations require every FSA to run on a plan year of 12 consecutive months, written into a formal plan document.1Federal Register. Employee Benefits-Cafeteria Plans That document is what gives the account its tax-exempt status, and it must state who is eligible, how elections work, and the exact start and end dates.2eCFR. 26 CFR 1.125-1 – Cafeteria Plans
Most employers run their plan year from January 1 through December 31, but any start date is allowed. A company using a July 1 fiscal year might run its FSA on that same schedule. A plan year can be shorter than 12 months in limited situations, such as when an employer shifts its start date, but it can never be longer than 12 months.
2026 Contribution Limits
The IRS adjusts FSA caps annually for inflation. For 2026:
- Health care FSA: up to $3,400 per employee in pre-tax contributions.3FSAFEDS. Limited Expense Health Care FSA
- Dependent care FSA: up to $7,500 per household, or $3,750 if you are married and file separately.4FSAFEDS. New 2026 Maximum Limit Updates
- Limited-purpose FSA: the same $3,400 as a regular health FSA.3FSAFEDS. Limited Expense Health Care FSA
Every dollar you contribute avoids federal income tax, Social Security tax, and Medicare tax. For someone in the 22% federal bracket, putting $3,400 into a health FSA saves roughly $1,000 in combined taxes over the year. The trade-off is that once you pick your contribution amount, you generally cannot change it until the next plan year.
When You Can Enroll
Open Enrollment
Your employer sets an open enrollment period several weeks before the new plan year begins. This is your main window to decide whether to participate and how much to contribute. You choose a dollar amount based on your best estimate of upcoming costs, and that amount is spread evenly across your paychecks for the year. Miss open enrollment and you typically wait until the following year, unless you have a qualifying life event.
Starting a New Job
If you start a new job after the plan year has already begun, you generally get a limited window to enroll. The federal employee program gives new hires 60 days from their start date.5FSAFEDS. Enroll in a Plan Private employers commonly set 30- or 60-day windows. Your contributions cover only the remaining months in the plan year.
Changing Your Election Mid-Year
Once the plan year starts, your contribution amount is locked. The IRS treats FSA elections as irrevocable because the whole point of the tax break is that you commit upfront.1Federal Register. Employee Benefits-Cafeteria Plans The one exception is a qualifying life event, sometimes called a “change in status.”
Events that allow a mid-year change include:6eCFR. 26 CFR 1.125-4 – Permitted Election Changes
- Marriage, divorce, legal separation, annulment, or death of a spouse.
- Birth, adoption, placement for adoption, or death of a dependent.
- You, your spouse, or a dependent starts or stops working, takes unpaid leave, or changes worksites in a way that affects benefit eligibility.
- A child ages out of coverage or loses student status.
- A move to a location that affects your plan’s coverage network.
Having a qualifying event does not mean you can make any change you want. The adjustment must correspond logically to the event that triggered it.7Internal Revenue Service. Treasury Decision 8878 – Tax Treatment of Cafeteria Plans A divorce lets you drop coverage for your ex-spouse; it does not justify canceling a dependent child’s coverage.
Most plans require you to request the change and provide documentation within 30 to 60 days of the event. Check your plan document for the exact deadline, because there is no single federal rule that applies to every employer. Wait too long and you lose the right to adjust.
Deadlines for Spending Your Balance
The use-it-or-lose-it rule is the defining constraint of every FSA: money left in your account at the end of the plan year is forfeited.8Internal Revenue Service. Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans The IRS lets employers soften this with one of two relief options. An employer can offer one, but not both, for the same type of FSA.
Grace Period
Your employer can add a grace period of up to two and a half months after the plan year ends. During that window, you can incur new expenses and pay for them with last year’s remaining balance.8Internal Revenue Service. Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans For a calendar-year plan, that grace period runs through March 15. Anything unspent after it ends is gone.
Carryover
Instead of a grace period, your employer can allow a carryover of unused funds into the next plan year. For 2026, the maximum carryover is $680.4FSAFEDS. New 2026 Maximum Limit Updates Anything above that is still forfeited. If you contributed $3,400 and spent only $2,000, you carry over $680 and lose the remaining $720. Some employers also require you to re-enroll for the next year before the carryover kicks in.
Run-Out Period
The run-out period is a claims-filing window, not extra time to spend money. After the plan year ends (or after the grace period ends, if your plan has one), you get additional time to submit reimbursement requests for expenses you already incurred during the plan year. Most employers set this at 90 days.
The distinction trips people up. If you had a dental appointment on December 10 but never submitted the receipt, the run-out period is your last chance to file that claim. But you cannot book a new appointment in February and charge it to last year’s account unless your plan includes a grace period covering that date.
What You Can Spend On
Health care FSA funds cover doctor visit copays, prescriptions, eyeglasses, contacts, dental fillings, mental health services, over-the-counter medications, and menstrual care products. The full list is in IRS Publication 502.9Internal Revenue Service. Publication 502 – Medical and Dental Expenses
Dependent care FSA funds cover work-related care for children under 13 or other qualifying dependents. Daycare, preschool, before- and after-school programs, and day camp all qualify. Overnight camp does not.10Internal Revenue Service. Publication 503 – Child and Dependent Care Expenses
If You Leave Your Job Mid-Year
With a health care FSA, coverage ends on your termination date. You can submit claims for expenses incurred before that date, but nothing after. One upside: if you have already spent more than you have contributed, the employer absorbs the difference. Elect $3,400, spend $2,800 by March with only $850 taken from your paychecks, and you keep the $2,800 in reimbursements.
You may be able to keep your health FSA active through COBRA. Employers with 20 or more employees are generally required to offer COBRA for group health plans, and that includes health FSAs.11U.S. Department of Labor. Continuation of Health Coverage (COBRA) You pay the full cost, up to 102% of the plan cost, out of pocket.
Dependent care FSAs work differently. Even after you leave, your remaining balance stays available to reimburse eligible dependent care expenses incurred at any point during the same plan year. No COBRA needed.
FSAs and HSA Eligibility
If you are enrolled in a high-deductible health plan and want to contribute to a Health Savings Account, a regular health care FSA will disqualify you. The IRS treats a general-purpose FSA as “other health coverage,” which blocks HSA contributions.8Internal Revenue Service. Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans
The workaround is a limited-purpose FSA, which restricts coverage to dental and vision expenses: cleanings, fillings, crowns, orthodontia, eye exams, glasses, contacts, and LASIK. Because it does not cover general medical costs, it does not interfere with HSA eligibility.
One more wrinkle. If your regular health FSA has a grace period that carries unused funds into the new plan year, that grace period coverage can also disqualify you from HSA contributions. The exception is if your FSA balance was zero at the end of the prior plan year.8Internal Revenue Service. Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans If you are switching to an HSA-eligible plan, spend down your FSA balance before the year ends or make sure your employer offers a limited-purpose option.