What you need to know before the Dec. 31 deadline for using your flexible spending account.

• You may need to use your flexible spending account funds by Dec. 31.
• To get an earlier start in 2025, it's important to understand how to use your 2024 balance.

You may have to spend down your flexible spending account funds before the year ends or risk losing them.

Qualified medical and dependent care expenses can be paid for using pre-tax money set aside through flexible spending accounts, or FSAs.

Health savings accounts (HSAs) are not the same as regular savings accounts, as they are specifically designed to be used in conjunction with high-deductible health plans and do not have spending reimbursement deadlines.

According to FSA Store, an online retailer for FSA-eligible products, approximately 70% of FSA account holders must spend their funds by December 31.

If you are an FSA balance holder who hasn't fully utilized your funds for 2024, it's a good idea to contact your plan or human resources department to determine if the Dec. 31 deadline applies to you, advised Rachel Rouleau, chief compliance officer at FSA Store.

The deadline for required minimum distributions is fast approaching. This is the ideal time to purchase a pre-owned vehicle. Some credit card APRs are not decreasing.

FSAs may offer a grace period of up to two and a half months after the end of the plan year or until March 15, 2025, to spend down the funds, according to Rouleau. Alternatively, some plans may allow for a carryover of up to $640 from their FSA balance from this year into 2025.

For many other FSA account holders, neither of those options apply, Rouleau said.

Rouleau advised ensuring that funds are tracked and spent appropriately before Dec. 31.

In 2024, employees could contribute up to $3,200 to a health care FSA account.

On average, households with FSAs contribute $2,250 annually, with $1,820 coming from personal contributions and $430 from employers, according to Numerator.

How to make the most of your FSA funds

According to Numerator, 67% of FSA holders use their accounts for dental and vision care, 65% for prescription medications, and 64% for medical services and procedures.

According to Rouleau, many plans have run-out periods that allow FSA account holders to submit for reimbursement up to three months after the end of the plan year. However, regardless of when you submit for reimbursement, the funds must be spent by December 31.

FSA-eligible items include many over-the-counter products, such as acne treatments, pain relievers like Tylenol, and allergy medicines like Claritin, according to Rouleau.

Not all health care items or services are automatically covered by FSA reimbursement.

Nicole DeRosa, a certified public accountant and director of tax at SKC & Co. CPAs in Boonton Township, New Jersey, recommends her clients to consult IRS Publication 502 to determine if certain expenses are eligible.

According to the IRS, expenses that are eligible for FSA reimbursement are typically also deductible under the medical and dental expense deduction.

DeRosa stated that many expenses that individuals often overlook are actually eligible.

Notably, while veterinary, food, and grooming expenses are covered for service dogs, emotional support animals do not receive the same benefits.

Unless prescribed by a doctor to treat a medical condition, weight loss programs and cosmetic procedures are generally not considered eligible expenses, according to DeRosa.

Don't wait to spend 2025 FSA funds

You can start using your new FSA balance for 2025 as soon as the calendar turns to the new year.

"DeRosa advised that there's no need to wait for paychecks or accumulate a balance; instead, one can be proactive and start spending immediately."