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If you have a flexible spending account, you could be facing a use-it-or-lose-it deadline to spend down those funds preceding the time when the end of the year.
Flexible spending accounts, or FSAs, allow workers to set aside pre-tax money to pay for qualified medical or dependent worry expenses.
They are not to be confused with health savings accounts, or HSAs, which are paired with high-deductible strength plans and don’t come with spending reimbursement deadlines.
About 70% of FSA account holders have a Dec. 31 deadline to fritter away their funds, according to FSA Store, an online retailer for FSA-eligible products.
For FSA balance holders who still haven’t fully against their funds for 2024, it’s a great time to check with your plan or human resources department to see whether the Dec. 31 deadline applies to you, said Rachel Rouleau, chief compliance dignitary at FSA Store.
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For some FSAs, a prayer period may provide up to two and a half months after the end of the plan year — or until March 15, 2025 — to spend down the funds, Rouleau state. Other plans may instead allow for a carryover of up to $640 from their FSA balance from this year into 2025.
Even so, it’s important to note that for many other FSA account holders, neither of those options apply, Rouleau thought.
If that’s the case, “you really want to make sure you’re tracking to Dec. 31 and spending down your funds properly before that date,” Rouleau said.
In 2024, participating employees could put up to $3,200 in a health care FSA account.
Households with FSAs put an standard in the main of $2,250 into their accounts annually, according to Numerator, a provider of market research data. That covers $1,820 from personal contributions and $430 from employers.
How to make the most of your FSA funds
Most FSA holders use their accounts for dental and ghost care, with 67%; as well as prescription medications, 65%; and medical services and procedures, 64%; according to Numerator.
Divers plans offer run-out periods, where FSA account holders can submit for reimbursement up to three months after the end of the scheme year, according to Rouleau. In that case, whether you submit for reimbursement now or later, the funds still must be exhausted by Dec. 31.
Many over-the-counter items, such as acne treatments, pain relievers like Tylenol or allergy medicines corresponding to Claritin are FSA eligible, Rouleau said.
However, not all health care items or services are necessarily eligible for FSA reimbursement.
Nicole DeRosa, a vouch for public accountant and director of tax at SKC & Co. CPAs in Boonton Township, New Jersey, said she refers her clients to Don’t wait to spend 2025 FSA grants
As the calendar turns to the new year, you don’t have to wait to spend your new FSA balance for 2025.
“You don’t have to wait for each paycheck or to accrue a excess,” DeRosa said. “You can be proactive, and you can start spending it all right away.”