What’s the Difference Between an HSA and an FSA?

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While health savings accounts (HSAs) and flexible spending accounts (FSAs) both allow you to set aside money for qualified medical expenses on a tax-free basis, there are a few key differences between them.

For example, HSAs are only compatible with high-deductible health plans (HDHPs) and money you deposit in them rolls over from year to year. Meanwhile, FSAs are only compatible with employer-sponsored health plans and money you deposit in them may not roll over from year to year.

Read below for more HSA vs. FSA comparisons and learn everything you need to know to determine which type of health care savings account may be best for you.

Key Takeaways

  • Deposits into both a health savings account (HSA) and a flexible spending account (FSA) are tax free, as are withdrawals for health care and insurance expenses other than your premium payments.
  • You must have a high-deductible health plan (HDHP) to sign up for an HSA, while you must have coverage through your employer to enroll in an FSA.
  • HSAs allow you to deposit more money per year but FSAs allow you to withdraw the money you have elected to deposit into your account regardless of whether you have already deposited that amount.
  • While money in your account always rolls over at the end of the year if you have an HSA, funds will roll over to a limited degree or won’t roll over at all if you have an FSA.
  • If you already have an HSA, you may contribute to a dependent care or limited purpose FSA but not a traditional medical FSA.

What Is an HSA?

A health savings account (HSA) can complement your health insurance by allowing you to set aside funds for certain health care and insurance-related expenses. You can deposit money into your HSA on a pre-tax basis and then use it later to pay for medical services your primary health insurance doesn’t cover or take care of your share of out-of-pocket costs for covered services.

Keep in mind that you can’t freely use money from your HSA to pay your health insurance premiums. However, you can use it to cover expenses like these:[1][2]

You can only contribute to an HSA if you have a high-deductible health plan (HDHP), which comes with low premiums and high out-of-pocket costs. However, it’s worth noting that you may be able to use funds from your HSA to cover medical services for your spouse and dependents even if your HDHP doesn’t cover them.[1]

How Does an HSA Work?

Instead of buying an HSA from your health insurance company, you will generally set up an account through a financial institution like a bank or credit union. You will be able to contribute up to $4,150 over the course of 2024 to an HSA that only covers yourself, while you may contribute up to $8,300 throughout the year to an HSA that also covers your family. In addition, you can deposit an extra $1,000 per year as a “catch-up contribution” if you are at least 55 years old.[1]

Your Marketplace HDHP may fall into one of three health insurance tiers: bronze, silver or gold.[2] Although HDHPs only cover preventive services until you meet your deductible, you are allowed to use HSA funds to cover your deductible or pay for qualified medical expenses before you hit your deductible.

To qualify as an HDHP in 2024, an individual plan must have a minimum deductible of at least $1,600, while a family plan must have a minimum deductible of at least $3,200. Meanwhile, an individual HDHP must set its out-of-pocket maximum at $8,050 or below, while a family HDHP must set its out-of-pocket maximum at $16,100 or below.[3]

What Are the Benefits of an HSA?

There are numerous tax benefits associated with opening up an HSA. Specifically, your contributions are exempt from federal income taxes if your employer makes them on your behalf through payroll deductions, while contributions you make to a personal account are tax deductible. HSAs also accrue tax-free interest.[1]

Anyone can add money to your HSA including you, your employer, a family member or a friend.

In addition, you are the owner of your HSA regardless of whether your employer set it up, meaning the account stays active even if you leave your job. Finally, money in your account never expires, which means you can use an HSA to start saving money now in anticipation of future health expenses.[1]

What Are the Disadvantages of an HSA?

Since you are only eligible for an HSA if you have an HDHP, HSAs are not ideal if you have a chronic health condition or otherwise regularly require medical services due to the high deductible you will have to pay before your health insurance coverage kicks in. Even though you can put HSA funds toward your deductible, you risk not having enough money saved up to cover the deductible if you need serious medical care shortly after enrolling in your HDHP.

While you can technically spend money from your HSA on nonmedical expenses, there are penalties for doing so. You’ll have to pay federal income taxes on any HSA funds you spend for nonmedical purposes if you’re over the age of 65. If you’re younger than 65, you’ll incur a 20% tax penalty alongside the normal income tax amount.[1]

If there isn’t enough money in your account to cover a qualified medical expense, you will have to pay for it out of pocket and get reimbursed later once you have made enough HSA contributions. In addition, you can no longer contribute to an HSA once you enroll in Medicare. That said, you can still withdraw money you previously deposited into your HSA to pay for any qualified medical expenses your Medicare Advantage or Medicare Supplement plan doesn’t cover.[1]

What Is an FSA?

A flexible spending account, also known as a flexible spending arrangement or FSA, accompanies an employer-sponsored health plan and allows you to put away money without paying taxes on it and later withdraw it to cover medical expenses for yourself, your spouse or your dependents.

Like HSA funds, FSA funds may not be used to cover your health insurance premium payments. Examples of medical expenses you can spend FSA funds on include the following:[4]

  • Deductibles, copays and coinsurance
  • Dental care
  • Prescription drugs (including over-the-counter drugs that your doctor has prescribed)
  • Nonprescription insulin
  • Medical equipment (e.g. crutches)
  • Medical supplies (e.g. bandages)
  • Diagnostic devices (e.g. blood sugar test kits)

How Does an FSA Work?

Both you and your employer can deposit money into an FSA, although your employer is not legally obligated to do so. You will generally need to pay for qualified medical expenses out of pocket and then submit an FSA claim through your employer to be reimbursed. The maximum amount you can contribute to your FSA is $3,050 per year, although your employer could set the limit for your account even lower.[4][5]

Alongside the standard medical FSA, there are two alternative types of FSAs that allow you to save funds for specific purposes.

Dependent care FSAs exclusively cover daycare expenses for your dependents, while limited purpose FSAs exclusively cover dental and vision expenses.[6] While you can’t contribute to both an HSA and a medical FSA within the same year, you may be able to contribute to a dependent care or limited purpose FSA at the same time as your HSA.[7]

What Are the Benefits of an FSA?

FSA deposits and withdrawals aren’t taxed, meaning this kind of account can give you a tax-free way to set aside money for medical care. In addition, you can continue to contribute to your FSA after you’ve enrolled in Medicare as long as you’re still employed.[8]

Once you select how much money you will contribute to your FSA over the course of the year, you have access to that amount of money right away.[6] For example, if you elect to deposit $100 per month, you are free to withdraw $1,200 from your FSA on the day the account opens, although you would have to continue making contributions without withdrawing any more money from the FSA for the rest of the year in this situation.

What Are the Disadvantages of an FSA?

FSAs are not compatible with Marketplace health insurance plans, meaning you must receive coverage through a job-based group health insurance plan to participate in an FSA. Since your employer owns your FSA, you may lose any funds you have contributed to the FSA upon leaving your job.

Money you have contributed to an FSA may not carry over from year to year and, even if it does, your access to it will be restricted. Specifically, your employer can choose to either give you two and a half months at the beginning of the year to finish spending the previous year’s funds or let you carry over $610 to use at any point during the year.[4]

Unlike money you deposit into an HSA, any funds you contribute to an FSA won’t accrue interest. Finally, your FSA won’t ever reimburse you for money you spend on nonmedical expenses, so you are somewhat more limited in how you can spend your money once it has entered your FSA.

How Are HSAs and FSAs Different?

While both types of accounts enable you to set aside money that isn’t subject to federal taxes in order to pay for medical expenses besides insurance premiums, there are several differences to consider when deciding between an HSA and an FSA. See the below table and infographic for an overview of some of the biggest differences.


Health Savings Account

Flexible Spending Account

Compatible Plans

High-deductible health plans

Employer-sponsored health plans

Account Owner


Your employer

Who Can Contribute


You and your employer only

Maximum Annual Contribution

$4,150 for individuals and $8,300 for families



You can access the account even after leaving your job

You may lose access to the account after leaving your job

Accessible Funds

Only what has been previously deposited into the account plus any interest the deposited money has earned

The entire amount you have elected to contribute for the year regardless of whether you have actually deposited that amount of money yet

health savings account hsa versus flexible spending account fsa comparison infographic

How To Choose an HSA or an FSA

Whether you should pick an HSA or an FSA largely depends on your circumstances. For example, an HSA may be beneficial if you rarely need medical services because you are young and healthy but want to start saving up in case you need more care later in life or so you can cover your high deductible in case an emergency arises. An HSA may also be the better option if you want the freedom to change jobs without first spending all of the money in your medical savings account.

Meanwhile, it’s worth considering an FSA if your employer offers to set up an account and match your contributions simply because you won’t be able to enroll in an FSA through the individual market. Even if you already have an HSA, you can still sign up for a dependent care or limited purpose FSA so your employer will contribute a bit of extra money to help you pay for child care, dental appointments or eye exams.

An FSA can also be useful if you want the freedom to spend funds as soon as you need them rather than waiting until you have made enough monthly contributions to be reimbursed for your medical expenses. In addition, an FSA may be appealing if you plan on working past the age of 65 since you could sign up for Medicare and still keep making contributions to your savings account.

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What happens if your HSA or FSA funds aren’t used?

Money in your HSA never expires, meaning your funds will always roll over from one year to the next.[1] Conversely, FSA funds expire at the end of each year unless your employer lets you carry over $610 or gives you an extra two and a half months to finish spending the money in your account.[4]

Can you have both an HSA and an FSA?

You can have both an HSA and a dependent care FSA or limited purpose FSA but not an HSA and a traditional medical FSA.[7]

Is an HRA the same as an HSA or FSA?

A health reimbursement arrangement (HRA) is similar to an HSA or FSA in that it allows you to withdraw tax-free reimbursements for qualified medical expenses. However, HRAs differ from FSAs and HSAs in that your employer is the sole contributor to the account and you may be able to use money from your HRA to cover your health insurance premiums.[9]


  1. Centers for Medicare & Medicaid Services. “What’s a Health Savings Account?,” Pages 1-2. Accessed Nov. 24, 2023.
  2. HealthCare.gov. “How HSA-Eligible Plans Work.” Accessed Nov. 24, 2023.
  3. Internal Revenue Service. “26 CFR 601.602: Tax Forms and Instructions. Part I, §§ 1, 223; Part III § 54.9831-1,” Page 2. Accessed Nov. 24, 2023.
  4. HealthCare.gov. “Health Care Options, Using a Flexible Spending Account FSA.” Accessed Nov. 24, 2023.
  5. HealthCare.gov. “Flexible Spending Account (FSA) - Glossary.” Accessed Nov. 24, 2023.
  6. District of Columbia Department of Human Resources. “Flexible Spending Accounts (FSA),” Pages 2-3. Accessed Nov. 24, 2023.
  7. Aetna. “HSA vs. FSA: What Is the Difference Between Them?” Accessed Nov. 27, 2023.
  8. Centers for Medicare & Medicaid Services National Training Program. “Frequently Asked Questions (FAQ): Medicare & Tax-Favored Health Programs,” Page 2. Accessed Nov. 24, 2023.
  9. HealthCare.gov. “Health Reimbursement Arrangements (HRAs): 3 Things To Know.” Accessed Nov. 27, 2023.

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