An FSA carryover lets you roll unspent money from your health Flexible Spending Account into the next plan year instead of forfeiting it under the use-it-or-lose-it rule. For balances left at the end of the 2025 plan year, you can carry up to $660 into 2026. For 2026 balances, the cap rises to $680.1Internal Revenue Service. Revenue Procedure 2025-32 The catch: carryover is an optional plan feature. Your employer has to adopt it, and if they haven’t, whatever sits in your account at year-end is gone.
How the Carryover Actually Works
Health FSAs normally require you to spend everything by the end of the plan year or forfeit the rest.2Internal Revenue Service. IRS: Eligible Employees Can Use Tax-Free Dollars for Medical Expenses The carryover is a narrow exception to that rule. Say your plan year ends December 31 and you have $900 left. If your plan permits the full IRS carryover, $680 rolls into the new plan year and the remaining $220 is forfeited. If you have $680 or less remaining, the whole balance rolls over.
The carried funds then sit in your account on top of whatever you elect to contribute for the new year. Some plan administrators spend carryover dollars first so older money gets used before new contributions; others draw from new contributions first. Ask your benefits administrator which method your plan uses, because it affects how much you might forfeit at the next year-end.
IRS Contribution and Carryover Limits
The carryover cap is pegged at 20% of the annual FSA contribution limit, so both figures move together with inflation. Increases come in $50 increments for contributions and $10 increments for carryovers.
- 2025 plan year: $3,300 contribution limit, $660 maximum carryover into 20263Internal Revenue Service. Publication 969 Health Savings Accounts and Other Tax-Favored Health Plans
- 2026 plan year: $3,400 contribution limit, $680 maximum carryover into 20271Internal Revenue Service. Revenue Procedure 2025-32
These are ceilings. Your employer can set a lower carryover amount, and many do. If your plan permits only $400 in carryover, that’s what applies to you regardless of the federal maximum. Your Summary Plan Description or benefits portal will spell out the specific figure.
Your Employer Has to Offer It
The carryover is not automatic. Your employer must adopt it by amending the written cafeteria plan document, and that amendment has to be in place no later than the last day of the plan year from which amounts would carry over.4Internal Revenue Service. Notice 2013-71 Modification of Use-or-Lose Rule for Health Flexible Spending Arrangements If your employer never adopted the carryover, the standard use-it-or-lose-it rule applies and you’ll forfeit anything left at year-end.
Check the plan documents before you assume you have this cushion. New hires often see “FSA” on a benefits summary and picture the same features their previous employer offered. Plans vary.
Carryover vs. Grace Period
The IRS does not allow an employer to offer both a carryover and a grace period on the same health FSA.4Internal Revenue Service. Notice 2013-71 Modification of Use-or-Lose Rule for Health Flexible Spending Arrangements Your employer picks one, or offers neither. The two solve the same problem in different ways:
- Carryover: Up to $680 (for the 2026 plan year) rolls forward, and you get the full new plan year to spend it. Anything above the cap is forfeited.
- Grace period: You get an extra two and a half months after the plan year ends to incur new expenses against your old balance. There’s no dollar cap, but the spending window is short.2Internal Revenue Service. IRS: Eligible Employees Can Use Tax-Free Dollars for Medical Expenses
A grace period tends to help people with larger leftover balances. A carryover helps people with modest balances who want more time to plan.
Does Carryover Count Against Your New Election?
No. Carried-over dollars do not count against your contribution limit for the new plan year. The carryover is treated as a separate balance adjustment rather than a salary reduction.1Internal Revenue Service. Revenue Procedure 2025-32 If you carry $660 from 2025 into 2026 and then elect the full $3,400 for the 2026 plan year, you’ll have $4,060 available for qualified medical expenses.
That flexibility can tempt over-contribution. It shouldn’t. Set your election based on expenses you actually expect, and treat the carryover as a safety net rather than a reason to stash more.
How Long You Have to Spend Carried-Over Money
Once your balance rolls into the new plan year, you have that full plan year to use it on eligible medical expenses.3Internal Revenue Service. Publication 969 Health Savings Accounts and Other Tax-Favored Health Plans Whatever carried money is still sitting there at the next year-end is forfeited for good. You can’t keep rolling the same dollars forward indefinitely.
Don’t confuse the spending deadline with the claims-submission deadline. Most plans include a run-out period, typically 90 days after the plan year ends, during which you can submit receipts for expenses you already incurred during the plan year. The run-out period gives you extra time to file paperwork, not extra time to shop.
What Happens to Your Carryover If You Leave Your Job
Leaving your employer generally means losing access to your FSA balance, carryover included. Health FSAs are treated as group health plans, so COBRA continuation technically applies, but paying COBRA premiums to preserve a small FSA balance rarely pencils out. Most former employees skip it.
After your last day, the plan will typically give you a run-out period to submit claims for expenses you incurred while still employed. Once that window closes, any remaining balance goes back to the plan. If you’re sitting on a large FSA balance and a job change is on the horizon, spending it down first is usually the safer move.
The HSA Eligibility Trap
If you’re covered by a general-purpose health FSA, you cannot contribute to a Health Savings Account.3Internal Revenue Service. Publication 969 Health Savings Accounts and Other Tax-Favored Health Plans That includes coverage that exists only because of a carryover balance. Even $10 rolled over from a general-purpose FSA makes you HSA-ineligible for the entire plan year that carryover covers.
This catches people switching from a traditional plan with a general-purpose FSA to a high-deductible health plan with an HSA. They expect to start HSA contributions on January 1, but leftover FSA dollars from the prior year carry forward and disqualify them. Two workarounds preserve HSA eligibility if your employer offers them:
- A limited-purpose FSA covers only dental and vision expenses and doesn’t conflict with HSA eligibility.3Internal Revenue Service. Publication 969 Health Savings Accounts and Other Tax-Favored Health Plans
- A post-deductible FSA reimburses nothing until you’ve met the minimum annual deductible, which also avoids the conflict.3Internal Revenue Service. Publication 969 Health Savings Accounts and Other Tax-Favored Health Plans
Some employers let you convert a general-purpose FSA carryover into one of these variants when you switch to an HDHP. Not all do. Check with your benefits administrator before open enrollment. The simplest fix, if it’s realistic, is to spend the general-purpose FSA balance down to zero before the plan year ends.
Dependent Care FSAs Don’t Have Carryover
The carryover applies only to health FSAs. Dependent care FSA money must be used within the plan year and any applicable grace period.5FSAFEDS. Dependent Care FSA If your employer offers a grace period on the dependent care account, you get the extra two and a half months; otherwise, unspent dependent care dollars are forfeited at year-end. The standard federal contribution limit is $5,000 for married couples filing jointly or single filers, and $2,500 for married individuals filing separately.