A big shopping deadline is drawing near for some people, and it has nothing to do with the holidays.
Millions of people use flexible spending accounts to help pay for health care, and some may lose money left in those accounts if they don’t spend it by year’s end.
There are many ways to spend that use-it-or-use it balance __ think raiding the local drugstore __ but it’s important to understand FSA rules before going on a shopping spree.
Here are some things to consider.
What are flexible spending accounts?
FSAs let you set aside money from your paycheck before taxes to cover a wide range of medical expenses like copays, deductibles, eyeglasses and other supplies. They are set up through your employer, and individuals can set aside up to $3,300 in these accounts.
Figuring out the right amount to set aside can be tricky because it involves forecasting how much care you might need. And you have to use the money by a certain point or you lose it.
What are the deadlines?
They can vary by employer or plan administrator. In some cases, you may have to spend the money by Dec. 31 or you will lose it.
But many plans offer a grace period in the new year to let people use their remaining funds or they allow participants to carry over some of the leftover balance.
“Make sure you understand the clock and the rules,” said David Feinberg of Justworks, a technology company that helps small businesses with benefits.
There are limits. The IRS, for instance, limits the balance carried over to $660 for 2025. Any amounts over that could be lost if they are still in your account by the plan deadline.
How can I spend my FSA balance?
Think of medical expenses not covered by insurance.
The IRS keeps a huge list of eligible expenses for both FSAs and health savings accounts. But companies can limit the expenses they’ll reimburse, so employees should check with their employers.
Eligible expenses can include travel costs to the doctor’s office, eyeglasses, bandages, sunscreen, condoms and tampons.
FSA dollars may even be used to cover things like gym memberships or electric massagers if you have a doctor’s note stating that they are medically necessary.
But they don’t cover things like health insurance premiums or certain cosmetic procedures like teeth whitening.
Do you have any receipts from health care you could submit, like the copayment for a doctor’s office visit? That would qualify.
Some plan administrators watch for stockpiling. Don’t buy a crate of aspirin to use up your balance. Limit purchases to about a year’s supply.
Items can be bought in stores or online.
What is an HSA and how does it differ?
Health savings accounts, or HSAs, also allow you to set aside money before taxes. The difference is that you won’t lose the balance, you can keep the account if you leave your job, and some plans let you invest the money.
HSAs can only be paired with high-deductible insurance plans. Account holders can contribute several thousand dollars each year, depending on the type of coverage they have.
FSAs work with more types of coverage. And the help they offer can be more immediate. The money you decide to set aside over the course of the year is available right away.
That can help people facing a big medical expense like a surgery at the start of a year, said Nicky Brown of Health Equity, which manages about 3 million FSAs.
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