FSA Carryover Rules 2026: How Much Can You Roll Over?

One of the most common questions about Flexible Spending Accounts is: "What happens to the money I don't spend?" The answer depends on your employer's plan, but in 2026, there are two possible safety nets — and many workers don't realize they have either one. Here's a complete guide to FSA carryover rules.

How Much Can I Carry Over from My FSA in 2026?

For plan years beginning in 2026, the IRS allows employers to let participants carry over up to $660 of unused FSA funds into the next plan year. This is up from $640 in 2025, per IRS Revenue Procedure 2024-40.

Key details:

• The $660 carryover is optional — your employer must elect to offer it.
• The carried-over amount does not count against next year's $3,400 contribution limit. You could theoretically have $4,060 available ($660 carryover + $3,400 new contribution).
• Carryover funds are available immediately at the start of the new plan year.
• There's no "use it first" rule — carryover and new contributions are pooled together.

What Is the Difference Between FSA Carryover and Grace Period?

Employers can offer one, the other, or neither — but not both. Here's how they compare:

Feature	Carryover	Grace Period
What it does	Rolls up to $660 into next plan year	Extends spending deadline by 2.5 months
Dollar limit	$660 maximum	No dollar limit — full balance eligible
Time limit	No time pressure — funds available all next year	Must spend by March 15 (for calendar-year plans)
Forfeiture risk	Any amount above $660 is forfeited	Full balance forfeited if not spent by grace period end
Availability	Employer's choice	Employer's choice

Which Is Better: FSA Carryover or Grace Period?

It depends on your situation:

• Carryover is better if you tend to have small leftover balances ($660 or less) and want zero time pressure.
• Grace period is better if you sometimes have large leftover balances and can realistically spend them within 2.5 extra months.

In practice, the carryover is more popular with employers because it's simpler to administer. According to Mercer's National Survey of Employer-Sponsored Health Plans, approximately 65% of employers who offer forfeiture protection choose carryover over the grace period.

What Happens If My Employer Offers Neither Carryover Nor Grace Period?

Some employers offer neither carryover nor grace period. In that case, the traditional "use it or lose it" rule applies — any unspent balance at the end of your plan year (typically December 31) is forfeited. Period.

If this is your situation, careful contribution planning is even more critical. Consider contributing conservatively and tracking your spending closely throughout the year.

Where Does Forfeited FSA Money Go?

When FSA money is forfeited, it goes back to your employer. Employers can use forfeited funds to offset plan administration costs or reduce future contributions to the plan. In some cases, forfeited FSA funds are used to offset premiums.

According to EBRI estimates, Americans collectively forfeit approximately $4.5 billion in FSA funds per year.

How Can I Avoid Losing My FSA Balance?

1. Know your plan rules. Check whether your employer offers carryover, grace period, or neither. Your benefits portal or HR department can confirm this.
2. Track your balance monthly. Don't wait until December to check how much you've spent. Monthly check-ins keep you on track.
3. Front-load larger expenses. Schedule dental cleanings, eye exams, and other planned care early in the year so you know your remaining balance sooner.
4. Stock up on eligible items. Sunscreen (SPF 15+), OTC medications, first aid supplies, and contact lens solution are all FSA-eligible and non-perishable. Buy a year's supply before your deadline.
5. Consider high-value purchases. If your balance is large, look into prescription sunglasses ($150-500), orthotics ($200-800), LASIK consultations, or a new pair of prescription eyeglasses.

What Happens to My FSA Carryover If I Leave My Job?

Do I lose my FSA if I change employers?

Generally, you forfeit any remaining FSA balance (including carryover) when you leave your employer. However, you have until your termination date to submit claims for expenses incurred before you left. Some plans allow a run-out period of 30-90 days after termination to submit claims.

Can I change my FSA contribution mid-year?

Only if you experience a qualifying life event (marriage, divorce, birth of a child, change in employment status). Otherwise, your election is locked for the plan year.

Does COBRA affect FSA carryover?

You can elect COBRA continuation for your healthcare FSA, but you'll need to pay the full contribution amount (no employer subsidy). Most people don't find this cost-effective unless they have significant planned medical expenses.

How Do I Track My FSA Carryover and Deadlines?

The easiest way to avoid forfeiture is to know exactly where you stand at all times. SpendRebel monitors your FSA balance, calculates your daily burn rate, and sends escalating reminders as your deadline approaches. It's free — set it up in 2 minutes and stop losing money.

Frequently Asked Questions

Does the FSA carryover count against my next year's contribution limit?

No. The $660 carryover is in addition to your new contribution limit. For 2026, you could have up to $4,060 available ($660 carryover from 2025 + $3,400 new election for 2026).

Is the $660 carryover automatic or do I have to request it?

If your employer's plan offers carryover, it is automatic. Any balance up to $660 remaining at year-end carries over without any action required from you. Amounts above $660 are forfeited automatically.

Can my employer offer both carryover and a grace period?

No. IRS rules prohibit offering both. Your employer must choose one or the other (or neither). Check your Summary Plan Description or ask your HR department which option applies to your plan.

What is the FSA carryover limit for 2025 vs 2026?

The FSA carryover limit for 2025 is $640. For 2026, it increases to $660 per IRS Revenue Procedure 2024-40.