HSA vs. FSA: The difference and how to choose

Both health savings accounts (HSAs) and flexible spending accounts (FSAs) help you save money tax-deferred for healthcare expenses — but there are some key differences between these two types of accounts.

What are HSAs and FSAs?

An HSA is a tax-advantaged savings account designed to help those with high-deductible health plans (HDHPs) pay for out-of-pocket medical expenses.

An FSA is an employer-sponsored savings account that allows you to set aside pre-tax money for eligible healthcare expenses.

HSA vs. FSA: Key differences

HSAs can be offered through an employer or you can sign up for one independently, as long as you have a high-deductible healthcare plan. FSAs can only be accessed through your employer, if they offer the option. In 2025, individuals can contribute $3,300 to an FSA and $4,300 to an HSA.

Because they’re an employee benefit, FSAs aren’t generally portable if you leave your employer, but HSAs are. That means that when you quit your job or retire, you lose any unspent FSA funds. But if you have an HSA, you’ll still have access to any unspent money.

Here’s a high-level breakdown of the major differences between these two types of health savings accounts:

How to choose between an HSA and an FSA

When deciding between an HSA and FSA, consider your health insurance plan, anticipated medical expenses and employment. Here are some questions to ask yourself:

• Which health insurance plan do you have? If you have an HDHP, you may be eligible for an HSA. If you have a traditional health plan through your employer, an FSA might be your only option.

• What are your anticipated medical expenses? Because you can carry over all unused funds, an HSA provides more flexibility if you have low or uncertain healthcare costs. An FSA may be better if you have predictable medical expenses you know you’ll incur during the plan year.

• How much do you plan to contribute? HSAs have higher contribution maximums than FSAs. If you anticipate significant medical expenses, the higher HSA limits may be advantageous.

• What are your investment goals? Unlike FSAs, many HSAs allow you to invest your contributions for potential long-term growth. If you want to build savings for future healthcare costs, an HSA’s investment features may be appealing.

• What’s your employment status? Because you can take your HSA with you, it provides more portability if you think you may change jobs in the future. FSAs are less portable since they’re tied to your employer.

• Do you plan to use the account for long-term savings? After age 65, you can withdraw HSA funds for any reason without penalty (though you’ll pay ordinary income tax for non-medical withdrawals). This makes HSAs a potential complement to your other retirement savings tools.

If you’re eligible for both an HSA and FSA, the HSA usually provides greater flexibility and potential long-term benefits. However, an FSA can still be a smart tool to reduce your tax liability and save for healthcare costs if it’s your only option.

Can I have both an FSA and an HSA?

You won’t be able to have both types of accounts unless your FSA is a “limited purpose” FSA. These FSAs cover only dental and vision expenses, and HSA holders may also be eligible to use both types of accounts simultaneously (provided they don’t double-dip by having the FSA and HSA cover the same expense). Eligibility varies on a case-by-case basis, so speak to your employer.

If you’re eligible for either an FSA or an HSA, you should take full advantage of each plan’s perks. The main benefit is that you can save on taxes by putting part of your pay toward one of these tax-advantaged accounts. Both will reduce your taxable income, allowing you to pay less in taxes at the end of the year because the money you put in an FSA or HSA comes out of your paycheck before taxes come.

To illustrate the savings, let’s say you make $60,000 per year and you decide to put $3,000 in your FSA. Instead of getting taxed on $60,000, you’d be taxed on $57,000 instead. After taking the 2025 standard deduction of $15,000, your income tax would be $4,802 rather than the $5,162 it would be had you not contributed to your FSA.

What’s considered a qualified medical expense?

You can use your FSA and HSA pretax/tax-deductible funds toward thousands of eligible purchases, which now include birth control (male and female), breast cancer screenings, glucose monitors, and insulin. But before spending, check whether it’s an approved expense.

The IRS tax code refers to the term “medical care” as “payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or payments for treatments affecting any structure or function of the body.”

Some of your everyday expenses may be eligible. To check, browse the FSA store eligibility list.

Here’s a broad look at some popular expenses that typically qualify:

• Medical co-payments and coinsurance
• Dental care costs (i.e., dentures)
• Vision care costs (i.e. eye examination, eyeglasses)
• Prescription medications and over-the-counter treatments

Additionally, HSA funds can be used toward post-tax insurance premiums such as COBRA and other long-term care premiums.

Expenses that typically do not qualify as eligible medical expenses include:

• Cosmetics or cosmetic surgery
• Exercise equipment
• Household help
• Funeral expenses
• Fitness programs (such as gym memberships)

How much should you contribute?

Once you’ve decided on an account, setting up your contribution is next. If you can afford to, contribute as much as you’re allowed each year to maximize your tax breaks and savings potential, especially with an HSA.

Consider the rollover rules for each type of account. FSA funds are use-it-or-lose-it, whereas funds in HSAs can roll over into the next year. So while you can put up to $3,300 in an FSA for yourself (or $6,600 for your family), only put in as much as you know you’ll use by the end of the year, so you lose money. Once you decide how much you’re putting into your FSA for each paycheck, you can’t change it until the next year unless you experience a “qualifying event.” Qualifying events are things like getting married or having a child.

Some employers have a partial rollover feature on their FSA accounts, allowing employees to roll over a maximum of $660. Alternatively, an employer may offer a 2 ½ month grace period of extra time for you to spend your FSA funds. Check to see if your plan allows either of these options.

If you choose an HSA, consider contributing the maximum amount yearly due to its flexibility. This would be $4,300 for an individual or $8,550 for a household in 2025. Account holders who are over age 55 or older can contribute an extra $1,000 to their HSA per year as a catch-up contribution.

Bottom line

HSAs and FSAs are both valuable tools that can help you save on taxes while setting aside funds for medical expenses. HSAs offer the most flexibility and potential long-term benefits, but require enrollment in an HDHP. FSAs provide a simple way to reduce your taxable income and pay for healthcare costs, but come with stricter “use-it-or-lose-it” rules.

If you still have questions about which account is right for you, reach out to your employer’s HR department or benefits administrator. You can also speak with a financial advisor who can provide advice based on your specific circumstances and goals.