FSA vs. HSA: Which account is best for you?

Health savings accounts (HSAs) and flexible spending accounts (FSAs), also known as healthcare flexible spending arrangements (HCFSAs), let you save for eligible medical expenses with pre-tax dollars. You generally can’t have both types of accounts, so read on to learn the details of each to decide which, if either, is best for you.

Both HSAs and healthcare FSAs cover qualified medical expenses that generally include the costs to treat, manage, or prevent a physical or mental condition not covered by your health insurance. Common costs include deductibles, prescription drugs, over-the-counter medications, eyeglasses, hearing aids, weight loss programs, and more.

For both accounts, your contributions and withdrawals are tax-free. However, each program has eligibility requirements and other rules to follow to take advantage of its benefits.

Eligibility: To open an HSA, you need a high-deductible health plan (HDHP). An HDHP generally requires a lot of money up front before your health insurance starts to pay, which is why an HSA comes in handy.

You can open an HSA at a bank, credit union, or insurance company, or go through your employer if offered.

Contributions: You can fund an HSA through your employer using pre-tax payroll deductions. If you have an account outside your employer, you’ll deduct your HSA contributions when you file your income tax return.

For tax year 2025, individuals can contribute up to $4,300 and families up to $8,550. If you’re aged 55 to 65, the IRS allows an extra $1,000 as a catch-up contribution. Employer contributions count toward the annual limit.

For tax year 2026, an individual can contribute up to $4,400, and a family up to $8,750.

Reimbursements: Some HSA plans come with a debit card you can use to pay for eligible healthcare costs. Without a card, you’ll likely pay out of pocket and request a funds transfer to your bank account.

Rollovers: Your HSA funds roll over from year to year and follow you even if you leave your employer. Money in an HSA can earn tax-free interest, and you may also be able to invest a portion of your HSA once you’ve reached a savings threshold.

Eligibility: You can only get an FSA through your employer. They’re currently not available to self-employed individuals. If an FSA is part of your employee benefits plan, you can usually enroll regardless of your health plan.

You usually can’t have an FSA and an HSA, unless it’s a limited-purpose FSA, which covers care outside your primary health plan, like vision and dental expenses.

Contributions: Employers use payroll deductions to fund your FSA. Your contributions are pre-tax, lowering your taxable income and, ultimately, your tax bill. The individual annual contribution limit is $3,300 for tax year 2025. Each spouse can contribute to their employer’s FSA for an annual limit of $6,600 for the household if married and filing jointly.

Reimbursements: Pay for your eligible expenses with an FSA debit card or pay out of pocket and submit a claim for reimbursement. Distributions are tax-free for qualified medical expenses.

Rollovers: Money in a healthcare FSA does not roll over from year to year. You generally need to use all of your funds by the end of the year, or you’ll forfeit them to your employer. Employers can offer a grace period of up to 2 ½ months or a carryover of up to $660 into 2026.

In order to decide if an HSA or FSA is best for you, you’ll need to look at your health insurance premiums and deductibles as well as your overall health and anticipated expenses.

HSAs require a high-deductible health plan. An HDHP could have lower premiums than a traditional health plan, but you’ll pay more up front before insurance kicks in. If you anticipate frequent care, you could foot the bill for costs that far exceed your HSA contribution limit. On the other hand, if you don’t think you’ll need a lot of medical care throughout the year, you could save on an HSA by taking advantage of lower health plan premiums and an HSA balance that carries over.

An FSA is a use-it-or-lose-it plan, so try to use your funds within the year. If you tend to have high medical expenses, you may find even more savings with an FSA since it doesn’t require a high-deductible health plan. Unlike an HSA, you can qualify for an FSA with any of your employer’s health insurance plans, even those with lower deductibles.

Who is eligible for HSAs and FSAs?

Individuals with a high-deductible health plan are eligible for an HSA. FSAs are only offered through an employer, so you’ll need to work for an employer that provides one.

Can I have both an HSA and an FSA?

You generally cannot have an HSA with a healthcare FSA unless it’s a limited-purpose FSA. With a limited-purpose FSA, you can save for medical costs your main insurance does not cover, like dental and vision expenses.

You could benefit from an HSA if you’re generally healthy and are comfortable with a high-deductible health plan, since you’ll need to be enrolled in one to qualify.

FSAs may be a better fit if you expect medical costs within the year. If you don’t use the funds, they’re gone at the end of the year. It’s best to look at your anticipated medical expenses and what you’ll pay in deductibles for the year to see which account is best for you.