Do Dependent Care FSA Funds Rollover? | Stop Losing Money

Most Dependent Care FSAs don’t roll unused money into the next plan year, but some plans let you spend it during a short grace period.

If your Dependent Care FSA still has money near year-end, the deadlines matter more than the balance.

Below you’ll see what most plans allow after December 31, which expenses qualify, and a simple way to set an election that matches your care calendar.

How dependent care FSAs handle unused money

In most plans, a Dependent Care FSA works on a use-it-or-lose-it basis. If you don’t incur eligible dependent care expenses by your plan’s cut-off date, any remaining balance is forfeited.

Two plan features can soften the rule. A grace period gives you extra time to incur new expenses after the plan year ends. A run-out period gives you extra time to file claims for expenses you already incurred by the allowed date.

Employers choose which features to offer. Your benefits portal may show a balance, but the plan document decides what dates count and what receipts are required.

Do Dependent Care FSA Funds Rollover? What plans allow

No. A standard Dependent Care FSA does not use the same “carryover” feature that some health care FSAs use. Leftover money is usually forfeited unless your plan offers a grace period or another permitted extension.

There was a narrow, time-limited exception tied to pandemic relief. The IRS described temporary options that allowed some employers to let unused dependent care amounts be used in a later plan year, under specific rules and tax timing. That guidance is in IRS Notice 2021-26. If your plan adopted that relief, HR or your plan administrator can confirm which plan years were included.

Grace period vs run-out period

People mix these up, and that leads to missed reimbursements. Here’s the distinction.

• Grace period: extra time to incur new eligible care after plan year end (often up to March 15 for a calendar-year plan).
• Run-out period: extra time to submit claims after the service date, as long as the service happened by the allowed “incur” date.

A plan can have one, both, or neither. Some plans have a grace period for service dates and a later deadline for filing paperwork.

Why dependent care reimbursements can feel slow

Many employees expect reimbursement to work like a health care FSA. Dependent care accounts often work differently.

Many Dependent Care FSAs reimburse only up to what has been taken from your pay so far, so early-year claims may be paid in pieces.

What expenses count so your plan can reimburse you

Dependent care benefits are meant for care that lets you (and a spouse, if married) work or look for work. That’s the core test.

Eligible costs often include daycare, preschool (before kindergarten), before- and after-school care, and day camps. Costs that are mainly education (like K–12 tuition) don’t qualify, and overnight camp is excluded.

The IRS summarizes dependent care assistance program rules for employers, along with reporting basics, in IRS Publication 15-B. The taxpayer-side rules, including provider information you may need on your return, are laid out in the Instructions for Form 2441.

One nuance that trips people up: many plans reimburse only after the care has been provided. Prepaying a caregiver can still be fine, yet reimbursement may wait until the service dates pass.

Deadlines that decide whether money is kept or forfeited

To know whether you’ll lose money, you need three dates from your plan. Write them down right after open enrollment.

• Last service date: the last day care can be provided and still count for the plan year’s money.
• Last claim date: the last day you can submit receipts.
• Reimbursement stop date: the point after which the plan won’t pay, even if you submit paperwork.

Need a plain-language reference point? OPM notes that a dependent care FSA does not have carryover, and it describes the grace period used in that federal program. See the OPM FAQ on what happens to DCFSA dollars after the benefit period.

If your plan has a grace period, the last service date can extend into the new year. If your plan has no grace period, the last service date is usually the last day of the plan year.

Situations that change your leftover risk

Job changes during the year

When you leave an employer, contributions usually stop. You may still be able to claim eligible care that happened while you were enrolled, yet you still have to meet the plan’s filing deadline. Get the run-out date in writing from the plan administrator.

Care arrangements that change fast

If a child starts school, a caregiver quits, or a spouse’s work schedule shifts, your expected costs can drop. Many plans allow election changes only after a permitted status change and within a limited window. Act early so your election tracks reality.

Rule or plan feature	What it changes	What to do
No grace period	Care must be provided by plan year end	Match your election to firm, on-calendar care costs
Grace period	Lets you use last year’s funds for care dates in early-year weeks	Plan backup care or extra days in January–March
Run-out period	Gives extra time to file receipts	Submit claims monthly and keep receipts in one folder
Reimbursement limited to payroll deposits	Early claims may be paid in pieces	Budget the timing and expect partial payments early
Work-related care test	Care must allow you to work or seek work	Keep a simple log that ties care days to work days
Provider detail requirement	Missing info can delay or block payment	Collect provider legal name, mailing location, and tax ID before you enroll
Mid-year election change rules	You may be locked into a bad election	Report status changes to HR right away
Temporary relief in specific plan years	Some employers let unused amounts be used in later periods	Ask whether your plan adopted the relief described in IRS Notice 2021-26

How to set your next election with less guesswork

Build your election from your real schedule, not the maximum.

1. Start with the calendar. Count the weeks you expect paid care while you work. Add school breaks, travel, and any recurring late days.
2. Price it per week. Use your provider’s current rate sheet. Separate each child’s program if they differ.
3. Remove planned gaps. Vacation, unpaid leave, switching caregivers, or starting school can cut costs.
4. Leave a margin. Elect a bit under the estimate if your costs can drop without warning.

Then compare the Dependent Care FSA with the child and dependent care credit. The Form 2441 instructions explain how they interact.

Ways to use leftover funds without breaking the rules

If you see a surplus, don’t panic-buy care you don’t need. Use the account the way it was intended: pay for real care that lets you work.

Add extra hours on workdays

If your provider allows extra hours, extend a few days when work is heavy. Early drop-off, later pickup, or added after-school care can be eligible if it’s genuinely tied to work needs.

Plan for backup care during common disruptions

Provider holidays, school closure days, and caregiver gaps can drive last-minute costs. A licensed backup care provider, a drop-in center, or an adult day program for an eligible dependent can count if the care meets your plan’s rules and you can document the provider details.

Submit claims as you go

Monthly filing keeps your balance accurate. It also gives you time to react while you still have eligible care days left on the calendar.

Eligible expense map for quick checks

Use this table before you assume a cost will reimburse. Plans can add extra documentation rules, yet the categories below match the federal definitions used for dependent care benefits and the tax credit.

Expense type	Usually eligible?	Claim detail to watch
Daycare center or home daycare	Yes	Service dates and provider tax ID are usually required
Preschool (before kindergarten)	Yes	Receipts should separate care from non-care fees when possible
Before- and after-school care	Yes	Tuition and activity fees can be excluded; care hours are the focus
Summer day camp	Yes	Day camp can qualify; overnight camp does not
Nanny or babysitter in your home	Often	Provider reporting and household employment paperwork may apply
Adult day care for an eligible dependent	Yes	Program must be primarily for care, not medical treatment
K–12 tuition	No	Education costs don’t qualify even when school hours match work hours
Overnight camp	No	Overnight stays are excluded from dependent care definitions

Paperwork that prevents denied claims

Most denied claims trace back to missing details. A little structure helps.

• Get provider details early. Ask for the legal name, mailing location, and taxpayer identification number at the start of the year.
• Save receipts with service dates. Payment dates alone can cause delays.
• Track your own dates. Keep a simple log of care days, especially if your work hours vary.
• File before the rush. Claims submitted in a steady rhythm are easier to fix if the plan asks for more info.

End-of-year checklist that stops forfeitures

Run this in early November, then again in early January if your plan has a grace period.

1. Check your current balance and the plan’s last service date.
2. Estimate remaining eligible care costs through that date.
3. If a surplus remains, schedule real eligible care days that match work needs.
4. Submit all pending claims and confirm they were approved.
5. Store receipts and provider info so tax filing is smooth.

Know your dates, file on time, and set a realistic election. That’s the easiest way to avoid forfeitures.