HSA vs. FSA
You get to decide whether to open an HSA or FSA, but your health plan decides which one is available to you.
HSAs only come with high-deductible health plans and FSAs come through employer plans that aren’t high-deductible. The chart below compares how each account works (and if you just want the shortest version, skip to the benefits and drawbacks at the bottom).
Health Savings Account (HSA) |
Flexible Spending Account (FSA) |
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| What is it? | A private savings account where you put pre-tax money away to help pay for your out-of-pocket health care costs/qualified medical expenses | An employer sponsored savings account where you put pre-tax money away to help pay for your out-of-pocket health care costs/qualified medical expenses. |
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What insurance
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High deductible health plan (HDHP) only | Employer plans that are NOT HDHPs |
| Where is the money kept, and how do I access funds? |
This is a savings account in your name at the bank. Use the designated debit card from your bank to make qualified purchases. |
An FSA is a pre-tax payroll withholding, not a bank account. Use the designated debit card from your employer to make qualified purchases. |
| How much money can I contribute annually? |
There is an annual limit set by the IRS for how much you can contribute.
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There is an annual limit set by the IRS and your employer. It’s possible your employer will set it below the IRS limit.
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| When can you use funds? |
HSA funds accrue throughout the year. If you have funds in your HSA from the previous year you may use those, otherwise you must wait for additional funds to be added to your account throughout the year. | FSA funds are fully available to use on January 1st. |
| Do funds carry over to the next year? |
You never lose it! HSA funds carry over from year to year, FOREVER, until you use them. |
Use it or lose it! Employers can offer a grace period or a carry over (not both), or neither. Your employer determines how much (if any) can roll over each year, up to the IRS limits. Some employers offer a 2.5 month grace period so you can use leftover FSA funds until March 15 of the next year. |
| Changing your contribution |
You can change your contribution amount whenever you want during the plan year, up to the IRS limit. | Once you declare your annual contribution level during open enrollment, it cannot be changed without a qualifying life event. It is written in stone until the next open enrollment period. |
| If I forget to use my HSA or FSA for a qualified purchase, can I be reimbursed? |
No problem. Just pay yourself back out of the account via ATM withdrawal or online bank transfer. NOTE: You can only be reimbursed for expenses that came along AFTER you opened your HSA. Save your receipts, bills, and other medical expenses for your records. |
You can submit a claim with your employer’s FSA service, including proof of your medical expense. Save your receipts, bills, and other medical expenses for your records. |
HSA Benefits and Drawbacks
Benefits: Tax savings on expenses you have to pay anyway. You may be able to earn interest on the funds in this account depending on the bank you use.
Drawbacks: The full amount of funds for the year are not available up front on January 1. This might be a problem when first opening an HSA if you’re making a big purchase in January, otherwise the previous year’s funds carry over!
FSA Benefits and Drawbacks
Benefits: Tax savings on expenses you have to pay anyway. All of the funds are available for you to use on January 1.
Drawbacks: You can lose the funds if you don’t use them! Ask if your plan includes a carryover option or a grace period.
- Some plans may include a carryover option, meaning you have the entire following year to use whatever the roll over amount is (in 2026, the IRS FSA carryover limit was $680).
- Some plans might offer a grace period of up to 2.5 months (until March 15) to spend funds from the previous year.
What can I use HSA or FSA funds towards?
HSA and FSA funds can be used towards "qualifying medical expenses." Here are some examples of what qualifies:
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Prescriptions and medical devices
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Appointments: endocrinologist, PCP, dentist, eye doctor, therapy
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Dental exams and procedures
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Eye exams, prescription eyewear
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Low snacks, glucose gel or tablets
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Medical ID
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Alcohol wipes, hand sanitizer, disposable face masks
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Over the counter medications (ibuprofen/acetaminophen, allergy medications, vitamins)
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AND MORE!
This is not an extensive list. There are a LOT of items that are considered qualified purchases- do your research!