As the year comes to a close, it’s important to check whether you’ve used up your 2025 flexible spending account (FSA) funds. FSAs are a great way to save on taxes, but they typically require you to spend the money before year-end or risk losing it. Here’s a quick refresher on the rules, limits, and strategies to make the most of your account.
Health Care FSAs
Contribution Limits
For 2025, you can contribute up to $3,300 pretax to a health care FSA. This limit is adjusted annually for inflation and will rise to $3,400 in 2026. These funds can be used for medical expenses not covered by insurance.
Tax Advantages
Health FSAs allow you to save on taxes without needing to itemize deductions. Normally, medical expenses are deductible only if they exceed 7.5% of your adjusted gross income, which can be difficult to reach. Contributions also avoid Social Security and Medicare taxes, giving you extra savings.
Use-It-or-Lose-It Rule
Unless your plan offers a grace period or rollover option, you must spend your FSA funds by December 31. A grace period can extend until March 15 of the following year, while some plans allow a rollover of up to $660 into 2026 (rising to $680 for 2027).
Smart Ways to Spend Remaining Funds
Consider scheduling elective procedures, dental visits, or purchasing new eyeglasses. Even over-the-counter medications and eligible health supplies may qualify.
Dependent Care FSAs
Contribution Limits
In 2025, you can contribute up to $5,000 pretax ($2,500 if married filing separately). Unlike health FSAs, this limit isn’t adjusted annually. However, under the One Big Beautiful Bill Act, the cap will increase to $7,500 starting in 2026.
Eligible Expenses
Dependent care FSAs can be used for:
- Child care for dependents under age 13
- Care for a spouse or dependent who is physically or mentally unable to care for themselves and lives with you for more than half the year
Use-It-or-Lose-It Rule
Like health FSAs, dependent care FSAs require you to spend funds by year-end. Grace periods may apply, but rollovers are not allowed.
Year-End Checklist for 2025
Before the year ends, review your FSA balances and confirm whether your plan offers a grace period or rollover. Take action now to avoid forfeiting funds. If you’re unsure about your plan’s details, check with your HR department. For tax-related questions, consult a professional to maximize your year-end planning.