Many workers lose unused FSA money — but could still come out ahead. Here's how

Workers who fail to spend their flexible spending account balances by year-end forfeit the remaining funds under the IRS use-it-or-lose-it rule, but the tax savings from pre-tax contributions can still leave them ahead. Because FSA deposits escape federal income and payroll taxes, employees in higher brackets can come out even after forfeiting a portion of their balance, making the break-even point dependent on their marginal tax rate. The tradeoff matters as millions of workers race to exhaust accounts before the deadline, with employers typically offering grace periods or carryover options of up to $640 per year. Workers should calculate whether their tax benefit exceeds any expected forfeiture and check whether their plan offers a grace period or rollover before the deadline.