FSA Carryover vs Grace Period: Which One You Have, and When

FSA Carryover vs Grace Period: Which One Your Plan Has, and the Day It Ends

A health FSA can offer a carryover or a grace period, but never both, and some plans offer neither. With a carryover, up to $680 of unused 2026 money moves into your 2027 plan year (the IRS maximum; your employer can set a lower number). With a grace period, you keep spending last year's money for up to 2 and a half months after the plan year ends, which is March 15 for a plan that runs on the calendar year. Either way there is a third date that people miss: the run-out period, the deadline to send in receipts for last year's expenses. All three are in your plan's summary, and that is the place to check before December.

FSA carryover vs grace period, side by side

The rule comes from the IRS. A health FSA is "use it or lose it," but IRS Publication 969 lets a plan soften that in one of two ways: a grace period of up to 2 and a half months after the plan year ends, or a carryover of a limited amount. A plan that adopts a carryover "is not permitted to also provide a grace period." Your employer picks one, or neither.

	Carryover	Grace period	Neither
What happens to leftover money	Up to a set amount moves into next year	You can keep spending it for a short time	Lost after the plan year
How much	Up to $680 from a 2026 plan year	All of it, while the grace period lasts	Nothing
How long	All of the next plan year	Up to 2.5 months, March 15 for a calendar plan	None
What is lost	Anything above the carryover amount	Anything not spent by the end of the grace period	Anything not spent by the end of the year

The $680 figure is the maximum carryover for plan years that begin in 2026, set by the IRS in Revenue Procedure 2025-32, which also sets the 2026 contribution limit at $3,400. Your employer can choose a lower carryover amount. The 2027 numbers have not been published yet.

The third date: the run-out period

This is the one people mix up with the grace period.

Grace period is about when you can spend. A dentist visit on February 20 can still be paid from last year's money if your plan has a grace period that runs to March 15.
Run-out period is about when you must submit. It is the time after the plan year (or after the grace period) to send in claims for expenses you already had. IRS guidance (Notice 2013-71) describes it as a period "during which a participant can submit a claim for reimbursement of expenses incurred" in the plan year.

Your employer sets how long the run-out period is. It is in the same plan summary. If you paid out of pocket in December and forget to send the receipt before the run-out period ends, the money is lost even though the expense counted.

With a carryover, the amount that moves into next year is what is left after the run-out period, once last year's claims are paid.

How to find out which one you have

Open the plan summary. Your benefits portal or the open enrollment email usually links a summary or "plan highlights" page. Search it for "carryover," "rollover," "grace period" and "run-out."
Check your FSA account. The account page or the year-end statement may say "carryover" or "grace period" next to last year's balance.
Ask HR in writing if you cannot find it. Ask three things: carryover or grace period, the amount or the last day, and the receipt deadline.
Write down your balance today and what you still plan to spend before the end of the year.

If your plan has neither, the end of the plan year is your real deadline, and our guide to the FSA deadline in 2026 covers what you can still buy. Glasses and dental work are two common ways to use the money, see using vision insurance before the end of the year.

This is general information, not tax or benefits advice. Your plan document decides.

Where Tracy fits

Tracy, the assistant in dEssence, does not log in to your benefits account and does not see your FSA balance. You give her what you have: the HR email, the plan summary page, or a screenshot of the FSA account, from Telegram, iMessage, Chrome or the web.

Tracy pulls out the last day to spend and the last day to send receipts, and reminds you before each one. If you change your mind about when you want the reminder, just tell her. The FSA deadline sits on the same list as the other renewal dates nobody mails you a letter about.

Frequently asked questions

Can an FSA have both a carryover and a grace period?

No. A plan with a carryover is not allowed to also have a grace period for a health FSA. It can have one or the other, or neither.

How much can I carry over from my 2026 FSA?

Up to $680, the IRS maximum for plan years starting in 2026. Your employer can set a lower amount, and anything above it is lost.

When does the FSA grace period end?

Up to 2 and a half months after the plan year ends. For a plan year that ends December 31, that is March 15. Your plan can choose a shorter grace period.

What is the FSA run-out period?

A set time after the plan year when you can still submit claims for expenses you already had. It is a deadline for paperwork, not extra time to spend.

How do I know which one my FSA has?

Look in the plan summary or your FSA account for "carryover" or "grace period." If neither is there, ask HR, and assume the money must be spent by the end of the plan year.