How to Spend Down Your FSA Before December 31, 2026: The $680 Carryover Rule, the Grace-Period Trap, and 12 Smart Ways to Use Every Dollar

August is the sweet spot for FSA planning. You have roughly five months of eligible spending left before the December 31 deadline, plenty of runway to book appointments, order supplies, and actually get value out of your remaining balance — but also enough time that most people forget until December and end up panic-buying sunscreen and Band-Aids on the 30th.

FSA money is real money. You contributed pre-tax dollars, which for a typical middle-income household saves 22-32% in combined federal, state, and payroll taxes. Losing $500 of unused FSA money at year end is functionally the same as writing a $650-$725 check to your employer. That's the deal you accepted when you signed up, but it's an entirely avoidable outcome.

This is the 2026 spend-down playbook: exactly how the deadlines work, the $680 carryover vs. the 2.5-month grace period, what's eligible without a prescription (more than you think), what needs a Letter of Medical Necessity, and 12 concrete ways to use whatever balance you have left.

Most FSA confusion comes from mixing up three separate deadlines. They are:

1. The "incur expense" deadline. For most calendar-year plans, this is December 31, 2026. The service must be performed or the product purchased by this date — not billed later, not paid later. Incur means the date-of-service, not the payment date.
2. The grace period (if your employer offers one). Employers can offer up to 2.5 additional months to incur expenses — through March 15, 2027 for a calendar-year plan. If you have a grace period, you cannot also have carryover.
3. The run-out (claim submission) deadline. This is the last day to submit receipts and reimbursement claims for expenses you already incurred. It's commonly March 31 or May 31, 2027, but plans vary. Missing this deadline means losing the money even if the expense was eligible.

The IRS gives employers a choice for health FSAs: allow up to a $680 carryover into the next plan year (per Rev. Proc. 2025-32 for 2026 plan years), or offer a 2.5-month grace period, or offer neither. Employers cannot offer both.

Carryover ($680 for 2026 plan years)

Under carryover, up to $680 of unused funds from your 2026 plan year rolls into 2027. The rolled amount doesn't count against your 2027 contribution limit, so if you contribute the full $3,400 maximum for 2027 and carry over $680, you'd have $4,080 available. Anything above $680 that's still unspent on December 31 is forfeited.

Grace period (through March 15, 2027)

Under a grace period, you have 2.5 extra months to incur new expenses that count against your 2026 balance. This can be more generous than carryover for people with high balances, but it comes with a catch: during the grace period, HSA contributions are usually blocked (see the warning below) because the FSA is still considered "active" coverage.

Neither

Some employers offer neither. In that case, December 31, 2026 is a hard cliff. Whatever isn't used by 11:59 p.m. that night is gone.

Sorted roughly by how quickly you can move on them. Start at the top.

1. Schedule vision care now

Comprehensive eye exam, prescription glasses (frames + lenses), contact lenses, and prescription sunglasses are all fully FSA-eligible. Blue-light glasses are eligible only if they carry a prescription. A single pair of quality progressive lenses can easily consume $400-$800 of FSA money in one appointment. Most vision providers can book you within two weeks in August but book weeks out in December.

2. Book your dental cleaning, X-rays, and any deferred work

Cleanings, fillings, crowns, root canals, extractions, and orthodontia are eligible. Cosmetic whitening is not. If you've been putting off a crown or a night guard, your FSA covers it. Sedation and anesthesia billed as part of a medically necessary dental procedure are also eligible.

3. Refill or start prescriptions (including 90-day supplies)

Every prescription copay is eligible. If you take a maintenance medication, ask your prescriber to move you to a 90-day mail-order supply and pay with the FSA card. If you're near your annual limit, you can front-load January's refill by picking it up in late December.

4. Stock up on OTC medications without a prescription

Since the CARES Act of 2020, OTC drugs no longer require a prescription. Ibuprofen, acetaminophen, allergy meds (Zyrtec, Claritin, Allegra, Flonase), cold medicine, cough drops, digestive aids, laxatives, motion-sickness pills, and sleep aids all qualify. FSA Store, Amazon's FSA-eligible section, and HSA Store all mark eligibility clearly.

5. Menstrual care and family planning

Tampons, pads, cups, discs, and liners are eligible. So are OTC and prescription birth control, condoms, fertility test kits, and ovulation predictor kits. This category alone can absorb $100-$200 in one order.

6. Sunscreen (SPF 15+ and "broad spectrum")

Sunscreen with SPF 15 or higher and labeled "broad spectrum" is fully eligible — face, body, and children's formulas all count. After-sun aloe is also eligible. Buying a year's supply in late fall is a legitimate and easy way to use $60-$150.

7. First aid, home health, and monitoring devices

Blood pressure monitors, glucometers and test strips, pulse oximeters, thermometers, humidifiers (with Letter of Medical Necessity in many cases), heating pads, cold packs, KT tape, Band-Aids, gauze, antiseptic, and hydrocortisone cream are all eligible. A quality blood pressure cuff is around $50-$80 and lasts years.

8. Baby and toddler essentials

Breast pumps and related supplies (bottles, storage bags, replacement parts), baby thermometers, nasal aspirators, saline drops, and some diaper rash and cradle-cap products are eligible. Diapers themselves are generally not eligible unless prescribed for a specific medical condition.

9. Mental health — therapy copays and telehealth

In-network and out-of-network therapy copays, psychiatry visits, and telehealth mental health visits are eligible. If you've been on the fence about starting therapy, using your FSA to prepay for the last few sessions of the year is one of the higher-value uses of the account.

10. Chiropractic, acupuncture, and physical therapy

Chiropractic adjustments, acupuncture, and PT are eligible without additional documentation. Massage therapy is eligible only with a Letter of Medical Necessity from a physician tying it to a specific medical condition — get the LMN before the appointment, not after.

11. Fertility, pregnancy, and postpartum care

Prenatal vitamins, pregnancy tests, ovulation kits, doula fees in some plans (with LMN), postpartum recovery products, and fertility treatments including IUI and IVF are eligible in many cases. For a detailed breakdown, see our HSA/FSA and IVF coverage guide.

12. LASIK, PRK, and other vision correction

A single LASIK procedure can consume $2,000-$5,000 per eye of FSA/HSA money and is fully eligible. If you have a substantial balance and no grace period, scheduling LASIK in November or December is a high-impact move.

What requires a Letter of Medical Necessity (LMN)

These are eligible only when a physician provides a signed LMN linking the item to a specific medical condition (not general wellness):

• Massage therapy
• Weight loss programs (WW, Noom, Jenny Craig)
• Gym memberships
• Special foods for a medical condition (the incremental cost above normal food)
• Air purifiers and humidifiers
• Ergonomic furniture prescribed for back injury
• Vitamins and supplements (most are not eligible even with LMN; prenatals and glucosamine are common exceptions)

What's not eligible

• Cosmetic procedures (Botox for wrinkles, teeth whitening, cosmetic dermatology)
• Toiletries (toothpaste, shampoo, soap) — unless medicated and specifically prescribed
• Fitness trackers, smart watches, exercise equipment (unless with LMN for a specific condition)
• Insurance premiums (health, dental, vision)
• Health-share ministry contributions
• Concierge medicine membership fees (except in narrow cases)
• Diapers (unless prescribed for a specific medical condition)

If it's late December and you have a small balance to burn, these options ship fast and reliably qualify:

If you leave your employer partway through the year, your FSA coverage typically ends on your last day of employment — not December 31. You can only be reimbursed for expenses incurred before that date. The uniform coverage rule works in your favor here: if you elected $2,400 for the year and only contributed $1,000 through paychecks before leaving, you can still be reimbursed for the full $2,400 of eligible expenses incurred through your termination date. That's a genuine tax benefit, but it only works if you spend the money in time.

You can elect COBRA continuation of an FSA to extend the coverage period, but you'd pay the remaining contributions plus a 2% administrative fee. This rarely makes sense unless you have significantly more unspent balance than you've contributed.

The single best way to avoid a scramble next August is to right-size your election during open enrollment. The 2027 FSA contribution limit will be announced by the IRS in October 2026 (expect roughly $3,500). Base your election on last year's actual eligible spending, not on optimistic guesses about future medical needs.

A few practical moves for the coming plan year:

• Pull last year's out-of-pocket spending report. Your insurance portal usually has a year-end statement showing exactly what you paid.
• Add up predictable expenses: maintenance meds, cleanings, annual exams, contact lenses, kids' vision needs. Round down, not up.
• Reserve $680 of headroom if your plan has carryover. Even a moderate over-estimate is safe because $680 rolls forward.
• Consider a limited-purpose FSA if you're on an HDHP. Dental and vision only, so it doesn't disqualify you from HSA contributions.
• Model your total healthcare spending. Our Plan Cost Calculator can help you estimate premiums plus expected out-of-pocket costs, and our HSA/FSA Calculator shows the tax savings side-by-side with take-home pay.
• If you're on the marketplace, revisit our ACA Subsidy Calculator before open enrollment on November 1, 2026 — a smaller subsidy this year may make an HDHP + HSA combination more attractive than a Silver plan.

Money in an FSA is money you already earned and already paid taxes to protect. Losing it at year end isn't just a missed opportunity — it's a real financial loss, worth 22-32% of the forfeited balance in taxes you paid to keep. August is the last comfortable month to plan. September through November is when appointments start filling up and shipping windows tighten.

Pull up your FSA balance now. Book vision and dental. Refill prescriptions. Stack a season of OTC and sunscreen. If you're on the fence about therapy, use the funds you already set aside. And keep the LASIK conversation on the table if you have a large balance and no grace period.

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