FSA vs. HSA: The Differences Between Accounts - MagnifyMoney

FSA vs. HSA: Which Is Right for You?

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Health savings accounts (HSAs) and flexible spending accounts (FSAs) allow you to make pretax contributions and use the funds to pay for health care costs. They have similarities but major differences too. HSAs have some advantages over FSAs, so they’re a better option if you have a high deductible health plan.

In this article, we compare FSA vs. HSA, define the rules for each account and explain how you can choose.


While HSAs and FSAs are alike in many ways, they have notable contrasts like account eligibility, contribution limits, year-to-year rollover rules and account ownership. Here’s how HSAs and FSAs stack up:

FSA vs. HSA comparison chart

Health savings account (HSA)Flexible spending account (FSA)
Who’s eligible to open an account?Anyone with an active high deductible health plan (HDHP)Employees with an employer-sponsored health insurance plan
What expenses can I use my funds for?Qualified medical expenses, including dental, vision and suppliesQualified medical expenses, including dental, vision and supplies
How will I be reimbursed?You can use an HSA debit card or transfer funds to cover purchasesYou can use an FSA debit card or submit expenses to your employers for reimbursements
What are the tax benefits?Untaxed contributions, tax-free investment earningsUntaxed contributions
What are the annual contribution limits?$3,650 for individuals, $7,300 for families$2,850 for individuals, $4,900 for families
Will employers match contributions?Some employers will match contributions up to the limitSome employers will match contributions up to the limit
Can I change my contributions?Yes, you can change them at any timeYes, but only during open enrollment or qualifying life events
Do funds rollover the next year?Yes, your funds automatically roll over each yearThere can be a 2 ½ month grace period or the option to roll over some funds
Who owns my account?You own your HSAYour employer owns your FSA

HSAs and FSAs work in the same fundamental way. You can contribute money to your account tax-free — sometimes alongside employer contributions — and use those funds to pay for various medical expenses.

Both have contribution limits, but HSAs have higher limits. Both allow you to make automatic payroll contributions, but HSAs offer more flexibility in contributing funds. Companies and health insurance plans might also define qualifying medical expenses differently.

HSAs have some benefits over FSAs: You can roll funds over to the next year, make prior-year contributions for an income tax break and you keep your account for life. Meanwhile, employers own FSAs so you must use the funds in time or lose them.

What is a health savings account (HSA)?

Health savings account rules let you make pretax or tax-deductible contributions to save or invest your money before using the funds to pay for qualified medical expenses. If you’re eligible to open one, an HSA gives you more flexibility, higher contribution limits and the ability to keep your account, even if you open it with an employer and leave your workplace.

Reasons for choosing an HSA

Here are some of the benefits of opening an HSA instead of an FSA.

  • You keep your account forever. HSAs let you keep your money until you’re ready to use it, unlike FSAs, which generally have time limits. You can even invest your HSA once it reaches a particular size (typically $1,000), so your funds will grow tax-free over your lifetime.
  • You can change your contributions. You can contribute money to an HSA directly from your bank account (and you can’t do that with an FSA). You can also change your paycheck contributions at any time.
  • Your employer contributes to your HSA. Check if your employer will match your HSA contributions or even contribute regardless of whether you do. You may get free money just for opening an HSA through work.

What is a flexible spending account (FSA)?

A flexible spending account is an employee account where you can make pretax contributions and submit reimbursement requests to your employer for qualified medical expenses. Rules prevent you from rolling over your entire FSA balance to the following year, employer contributions might be less likely, and you have limited opportunities to set your contribution amounts.

Reasons for choosing an FSA

Here are a couple of circumstances when opening an FSA would be your best option.

  • You don’t have or want an HDHP. Your employer may not offer a high deductible health plan, or you may decide that an HDHP isn’t the right insurance plan for you. That means you can’t open an HSA, so an FSA might be your best bet.
  • You expect to spend your funds soon. FSAs typically expire, but they can still be a good option if you know you’ll use your FSA funds soon and won’t need to forfeit them.
  • Your employer contributes to your FSA. Like with an HSA, some employers may fund your FSA regardless of whether you contribute or they’ll at least match your contributions. It may be a good deal to open an FSA depending on what they do.

How do I choose between an HSA vs. FSA?

Ultimately, the choice might depend on whether you have or want a high deductible insurance plan. Those plans tend to have lower monthly premium payments, but you may be on the hook for significant costs paying up to your deductible — the minimum out-of-pocket expense before your insurance plan kicks in.

If you have an HDHP, an HSA would be better than an FSA for some of the reasons outlined above: you don’t lose any money at year-end, you can contribute to and use your funds in more ways, and the maximums for HSAs are higher than the maximums for FSAs. An employer is more likely to contribute to an HSA than an FSA too.

Since health savings accounts have some advantages compared to flexible spending accounts, you’ll probably want an HSA if you have a high deductible health plan. If you choose to open an HSA on your own, review our list of the best health savings accounts. But, since flexible spending accounts are available to those who don’t have an HDHP and have many of the same benefits, they’re a good alternative.

Frequently asked questions

The IRS defines medical expenses as the costs of prevention, diagnosis or treatment of disease or costs to affect any body part or bodily function. Those expenses would generally qualify for HSA or FSA reimbursement, but different insurers may have different rules.

You cannot open both a health savings account and a general purpose flexible spending account. Certain kinds of FSAs — limited-purpose or post-deductible flexible spending accounts — are compatible with an HSA.

A health savings account has some advantages over a flexible spending account, but flexible spending accounts are available to employees with regular health insurance plans instead of high deductible plans, unlike health savings accounts.

Yes, you are sometimes given a debit card with your HSA or FSA, but not all accounts have debit card access.