For 2025, the maximum FSA carryover is $640 (20% of $3,200 limit).

This applies only to Healthcare FSAs.

Important: Employers choose between carryover OR 2.5-month grace period, not both.

Dependent Care FSAs have no carryover - use it or lose it by December 31.

Check your plan documents to confirm which rule your employer uses.

The grace period allows 2.5 months (through March 15) to spend previous year FSA funds.

If your employer offers grace period instead of carryover, you can spend remaining 2024 funds until March 15, 2025.

Funds spent during grace period count against previous year balance first, then current year.

Most plans offer either grace period OR carryover, rarely both.

Unused FSA funds are forfeited under the use-it-or-lose-it rule, except for: $640 carryover if employer allows, OR grace period spending (through March 15), OR run-out period claims (typically 60-90 days for previous year expenses).

Forfeited money returns to employer, not to you.

Plan carefully to avoid forfeiture - average American loses $339/year.

Generally no, except for Qualifying Life Events (QLEs): marriage, divorce, birth/adoption, dependent age-out, employment status change, significant cost/coverage change.

Must request change within 30-60 days of QLE.

Change must be consistent with event.

No changes allowed just because you over/under-contributed.

Front-load spending if expecting QLE or job change.

Healthcare FSA covers: copays, deductibles, prescription drugs, dental/vision care, glasses/contacts, medical equipment, some OTC medications (with prescription), orthodontia, therapy/counseling.

Not covered: insurance premiums, cosmetic procedures, vitamins.

Dependent Care FSA covers: daycare, preschool, before/after school programs, summer day camps (not overnight).

Check IRS Publication 502 for complete list.

Calculate predictable annual expenses first: monthly prescriptions, planned procedures, copays, known dental/vision work.

Add 15% buffer for unexpected costs.

Healthcare FSA 2025 limit: $3,200.

Example: $200/month prescriptions + $500 glasses + $1,000 dental = $3,900 needed but only contribute $3,200 maximum.

Better to under-contribute slightly than forfeit money - 29.65% tax savings not worth forfeiture risk.