Have Unused FSA Funds? Here's Why You Should Start Spending Them ASAP

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KEY POINTS

  • FSAs require you to use up your account balance each year.
  • If you don't spend down your balance by the end of 2022, you could end up forfeiting money.
  • Note that you can spend your unused FSA funds on some OTC health products, or upgrade your prescription eyeglasses, if you won't have any more doctors' appointments in 2022.


You don't want to give up money that's yours.

There's a benefit to putting money into a flexible spending account (FSA), and it's the opportunity to pay less in taxes. If you contribute $2,000 to an FSA, the IRS won't tax you on $2,000 of income. It's that simple.

But despite their name, FSAs actually aren't as flexible as you might hope. That's because FSAs require you to commit to a contribution amount ahead of your plan year, and then spend down your entire balance in the course of that year.

Now some FSAs do allow for a grace period if you don't manage to spend all of your money on time. But not every FSA does. So if you're still sitting on funds in your 2022 FSA, it pays to start spending them as soon as possible.

Don't give up money that's yours

Let's say you put $2,000 into this year's FSA and at this point, you've only spent $800. It pays to see if your plan has a grace period or carryover option. You may be able to carry a portion of your FSA balance into 2023 and use it then, or you may get a couple of extra months in early 2023 to spend your balance down.

But if that's not the case, you'll want to get moving on spending your money. Otherwise, you could end up losing it.

Now you may have certain medical appointments you've been putting off, or appointments scheduled for early 2023 you can push up by a few weeks. If you take care of those appointments this year, you'll have the option to use your FSA funds to cover your copays. But some medical offices tend to book up months in advance, so if you want the option to see the doctor in November or December versus January, now's the time to start making calls.

Similarly, you may be able to renew prescriptions ahead of time if you squeeze in a doctor visit before the end of the year. But you'll need to get moving if you want that option.

Other ways to spend your FSA funds

It's not just doctor visits and prescriptions that you can use your FSA for. You can also use your money to buy things like contact lenses and eyeglasses. If you have an active prescription on file and your eyeglasses have seen better days, you may want to upgrade to a new pair since you have the funds in your FSA and won't have to charge that expense on your credit card (or, you might charge it on your credit card but get reimbursed).

You should also know that certain over-the-counter products are considered FSA-eligible. You can find a complete list here, but some of the things you can use your FSA for include bandages and ointment, sunscreen, and contact lens solution.

The money in your FSA is money that came out of your paychecks, so you should do whatever you can to avoid giving it up. The sooner you start spending down your remaining 2022 balance, the less likely you'll be to forfeit that cash.

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