As the ball prepares to drop in Times Square tonight, millions of Americans face another countdown with far more immediate financial consequences: the flexible spending account (FSA) deadline. For most workers with these tax-advantaged accounts, any unspent 2025 funds will be forfeited at midnight—money that simply disappears forever.

The stakes are staggering. Research shows that between 40% and 50% of FSA participants fail to spend all their funds before the deadline, forfeiting an average of $463 per person annually. Across the estimated 33 million Americans with FSA accounts, that translates to well over $1.5 billion in lost savings every year.

Understanding the FSA "Use-It-or-Lose-It" Rule

Unlike health savings accounts (HSAs), which allow unlimited rollover of unused funds, FSAs operate under strict federal rules that generally require participants to spend their entire balance within the plan year. This "use-it-or-lose-it" provision exists because FSAs provide significant tax advantages—contributions are made pre-tax, reducing your taxable income—and the government limits how long those tax benefits can be preserved.

The result is an annual scramble as December 31 approaches, with FSA holders rushing to find qualifying expenses before their hard-earned money evaporates.

Check Your Plan's Specific Rules

Before panicking, it's worth verifying your plan's exact deadline. While December 31 is the most common cutoff, some employers operate on different plan years. Additionally, many plans offer one of two relief options:

  • Grace Period: Some employers allow up to 2.5 additional months (until March 15, 2026) to spend remaining 2025 funds
  • Carryover Option: Plans may permit rolling over up to $660 of unused funds into the next year

Importantly, employers can offer a grace period OR a carryover provision, but not both. Check with your HR department or benefits administrator to understand which option, if any, applies to your plan.

Smart Ways to Spend Your FSA Balance Today

If you're racing against tonight's deadline, here are legitimate ways to use remaining funds:

Medical Expenses Most People Overlook

  • Over-the-counter medications: Thanks to the CARES Act, OTC drugs no longer require a prescription for FSA reimbursement
  • First aid supplies: Bandages, antiseptics, thermometers, and similar items qualify
  • Sunscreen: SPF 15 or higher products are FSA-eligible
  • Reading glasses and contacts: Including solution and accessories
  • Menstrual products: Another CARES Act expansion that many overlook

Vision and Dental Investments

Even if you're not due for an exam, many vision retailers and dental offices can process orders for prescription sunglasses, spare glasses, or dental appliances that can be paid with FSA funds today and delivered later.

FSA-Eligible Specialty Items

Specialized FSA stores have become popular last-minute destinations. These retailers offer curated selections of qualifying products, from TENS units for pain relief to UV sanitizers and acne treatment systems. While prices may be higher than general retailers, the convenience of guaranteed eligibility makes them attractive for deadline-day purchases.

What You Cannot Buy

The IRS maintains strict limits on FSA purchases. Items that don't qualify include:

  • Cosmetic procedures or products (unless medically necessary)
  • Health club memberships or fitness equipment
  • Teeth whitening products
  • Insurance premiums
  • Most vitamins and supplements (unless prescribed for a specific condition)

Planning for 2026

If you're losing money tonight, use this experience to inform your 2026 FSA election during next year's open enrollment. Consider:

More Accurate Estimation

Review your 2025 medical expenses closely. Many people over-contribute to FSAs, either out of optimism about planned procedures that don't materialize or underestimation of how much they can realistically spend on qualifying items.

HSA Alternative

If you're eligible for a high-deductible health plan with an HSA option, consider whether the unlimited rollover feature might be worth the trade-offs. Unlike FSAs, HSA funds never expire and can even be invested for long-term growth.

Dependent Care Considerations

Remember that dependent care FSAs have different rules than health care FSAs. If you have qualifying childcare or eldercare expenses, these accounts can provide significant tax savings without the same year-end pressure.

The Bigger Picture

The annual FSA deadline rush highlights a broader challenge in the American healthcare system: the complexity of tax-advantaged health accounts. Between FSAs, HSAs, HRAs, and their various rules and limitations, even financially sophisticated consumers struggle to optimize these tools.

For now, if you still have funds in your FSA, you have until midnight to use them. Don't let procrastination turn your tax savings into your employer's windfall.

And for next year? Set a calendar reminder for early December. Your future self will thank you.