HSA vs FSA: What's the Difference?
Health savings accounts and flexible spending accounts both let you pay for medical costs with pre-tax money, but they work very differently. Here's who can use each, how the money rolls over, and how to decide how much to put in.
By Pond.com editors Updated 3 min read
Quick answer
- Both let you pay for eligible medical costs with money that isn't taxed.
- You can only open an HSA if you have a qualifying high-deductible health plan.
- HSA money is yours to keep, rolls over every year and can be invested.
- FSA money is mostly "use it or lose it," though some plans allow a small carryover or grace period.
- FSAs are offered through employers; contribution limits for both change each year.
If you have health insurance through work, you may be offered an HSA, an FSA or both. Each one lets you pay for medical costs with money you don't pay tax on, which can save you a lot. But the rules are very different, and picking the wrong one, or putting in too much, can cost you.
This article is general information, not tax or financial advice. Contribution limits change each year; check IRS.gov or your plan for current amounts.
Side by side
| HSA | FSA | |
|---|---|---|
| Who can use it | People with a qualifying high-deductible health plan | Employees whose employer offers one |
| Who owns it | You | Your employer's plan |
| Unused money | Rolls over every year, forever | Mostly lost at year end; some plans allow a small carryover or a grace period |
| If you change jobs | Goes with you | Usually lost |
| Can it be invested? | Yes, often | No |
| Change contributions | Any time | Usually only at open enrollment or after a life event |
How an HSA works
You put in money before tax, it can grow tax-free, and you take it out tax-free for eligible medical costs. That makes it one of the best tax deals available. Many people pay current medical bills from their regular budget and leave the HSA invested for later, including retirement. See how health savings accounts work.
How an FSA works
You choose an amount for the year, and it's taken from your paychecks before tax. The whole year's amount is usually available from day one. The catch is that you must use it by the deadline, or you lose most of what's left.
What you can spend it on
Both cover many medical, dental and vision costs, such as:
- Deductibles, copays and coinsurance
- Prescriptions
- Glasses, contact lenses and eye exams
- Dental work
- Many over-the-counter medicines and supplies
How much to put in
- FSA: base it on costs you're sure of, like regular prescriptions, glasses or planned dental work. It's better to put in a bit less than to lose money.
- HSA: if you can, contribute as much as you can afford, up to the yearly limit. Unused money keeps growing for the future.
- Employer money: many employers add to HSAs. Make sure you get it.
Common questions
Usually not a regular FSA, because it makes you ineligible for an HSA. You can pair an HSA with a limited-purpose FSA, which covers only dental and vision costs, if your employer offers one.
You usually lose access to unused FSA money when you leave, unless you continue coverage through COBRA. Try to use it before your last day. An HSA stays with you whatever happens to your job.
It's a separate account for childcare and adult day care costs, not medical costs. It lets you pay for eligible care, such as daycare or after-school programs, with pre-tax money.