HSA vs. FSA: What Are the Differences?

Health savings accounts (HSAs) and flexible savings accounts (FSAs) offer tax benefits when paying health care costs. Both allow you to pay qualifying out-of-pocket expenses for health care with tax-free dollars, but the IRS rules governing these accounts differ significantly. For example, HSA funds roll over from year to year, while you’ll typically lose any FSA funds you don’t spend at the end of the year.  

Learn more about the key tax benefits of HSAs vs. FSAs, eligibility requirements, contribution limits, and savings strategies to help you choose the best tax-advantaged account for you.

What is a flexible spending account? 

Flexible spending accounts (sometimes called flexible spending arrangements) let you set aside money from your income before taxes to pay for health care costs. FSAs can be used to pay for qualified medical expenses outlined by your plan but generally include medical and dental expenses. This includes things such as your copayments, some medications, certain medical equipment, and other health care costs. For purchases made in 2020 or later, over-the-counter medicine (whether you had a prescription or not) and feminine care products are considered covered expenses.

Note, there are also FSAs that are specifically for dependent care expenses.

What is a health savings account?

A health savings account is a type of savings account that lets you set aside money on a pre-tax basis—meaning you don’t have to pay federal taxes on it. You can use HSA funds to cover qualified medical expenses, like copayments, deductibles, coinsurance, and other health care costs. In most cases, you cannot use HSA funds for health care premiums. Unlike an FSA, unspent funds can remain in an HSA from one year to another. This means you can use the funds at any time for qualified medical expenses. You can also earn interest (tax-free) on the account funds, further contributing to your savings.

HSA vs. FSA: Key differences

HSAs and FSAs both offer tax benefits. When you contribute to one of these accounts, those contributions can lower your taxable income for the given year. Qualified withdrawals—funds used for eligible health care expenses—may also be tax exempt.  

Consider the following factors about eligibility, contribution limits, ownership, tax advantages, and more to decide which option may be right for you.

Eligibility

Per IRS rules, you must meet the following criteria to open an HSA: 

• You’re currently enrolled in a qualified high-deductible health plan (HDHP). 
• You don’t have Medicare or another health insurance plan (exceptions apply). 
• You can’t be claimed as a dependent on someone else’s federal tax return. 

If you’re enrolled in an FSA or health reimbursement arrangement (HRA) that covers qualified health care expenses, you may be unable to contribute to an HSA. If you’re married and both you and your spouse are HSA-eligible, you will need to maintain separate HSAs to make contributions. That said, you can use your account funds to cover your spouse’s qualified medical expenses. 

The rules for opening an FSA are a little simpler. Most full-time employees are eligible, provided their employer offers health insurance and they aren’t enrolled in a marketplace plan. Self-employed individuals are not eligible for an FSA.

Contribution limits and rules

In 2025, you can contribute up to $3,300 tax-free to a flexible spending account. If you’re married and your spouse also has an FSA, they can contribute the same amount to their plan for a household maximum of $6,600. In some cases, your employer may also contribute. 

The 2025 HSA contribution limits are $4,300 for self-only coverage or $8,550 for family coverage. If you’re 55 or older, you can contribute an additional $1,000—this is often called a catch-up contribution.  

HSAs require a minimum annual deductible of either $1,650 (self-only coverage) or $3,300 (family coverage). The maximum out-of-pocket costs are $8,300 (self-only coverage) or $16,600 (family coverage).

Ownership

While an HSA is typically offered as part of the benefits from your employer, you may be able to open an HSA on your own if you have a health plan that is eligible. Either way, the account belongs to you, whether you open a HSA on your own or through work. This also means you can keep the account if you change employers. If you’re the designated beneficiary on your spouse’s HSA and they pass away, their HSA will effectively become yours as the surviving spouse. 

FSAs are available through your employer. If you leave your job, you typically can’t take your FSA with you.

Tax advantages

HSAs offer triple tax advantages. Your contributions are tax-free, you won’t be taxed on qualified medical expenses, and your money can grow tax-free in the account. Plus, if you open your own HSA, you may be able to deduct the contribution on your tax return. 

“FSAs for healthcare are particularly valuable for taxpayers who will be taking the standard deduction,” says Enrolled Agent (EA), Susan Yeatts. “Nearly all taxpayers can benefit to a degree because of the 7.5% AGI threshold that must be met before medical expenses can be deducted. They also cover some expenses, like over-the-counter medications, that wouldn’t be deductible on a tax return.” 

FSA contributions are also made with pre-tax dollars. In addition to saving income tax, these contributions are also not subject to payroll tax, which can save you even more money. 

Like HSAs, contributing to an FSA can reduce your taxable income. Unlike HSAs, your funds typically don’t carry over to the next year, so they won’t grow over time—though some employers allow limited FSA carryovers or grace periods. Qualified medical expenses are still tax-exempt.

Investment options

If you’re looking for a long-term way to invest, a health savings account could be a viable option. This is because you can invest your funds, though how much you earn depends on the plan. 

Once you reach age 65 or become disabled, you can withdraw money from your HSA for any reason without incurring a tax penalty. While the withdrawal won’t be subject to a tax penalty, you will have to pay normal income tax on non-qualified withdrawals. 

You cannot invest the funds in a flexible savings account.

Employer contributions and portability

Employers can (but are not required) to contribute to your FSA. Note that an FSA is typically a “use-it-or-lose-it” type of benefit. If you have an FSA and leave your current company, unused funds typically return to your employer. 

With an HSA, the account belongs to you. This means you can take the account with you when changing jobs. Your employer may contribute to your HSA, but those contributions are excluded from your income. Employer contributions also count against the plan’s contribution limits.

Fund rollover

Many plans require you to spend FSA funds by the end of the year or forfeit the money. However, depending on the plan, you may be able to roll over up to the IRS limit ($660 for 2025) to the next year. 

Some FSA plans have a carryover grace period of 2½ months, meaning you can use the funds until March 15 of the following year. Since it is possible to forfeit money, carefully review your medical needs and potential or planned costs for each year before choosing an FSA. If you have an HSA, you can roll over the funds year after year. This could make it easier to build up savings for future health care expenses.

Qualified expenses

Both HSAs and FSAs allow for certain qualified expenses to be made on a tax-free basis. Qualified expenses are those incurred by you, your spouse, or your dependents. 

HSAs and FSAs typically cover the following: 

• Copayments 
• Coinsurance 
• Deductibles 
• Certain medications (including over-the-counter medications) 
• Some medical equipment (like blood sugar test kits or crutches) 
• Other qualifying medical or dental costs 

Generally, HSA and FSA funds won’t cover insurance premiums. But there are some exceptions. For example, you may be able to use your HSA for long-term care insurance, COBRA premiums, Medicare premiums (if 65 or older), or health insurance while receiving unemployment benefits.

Penalties for non-qualified expenses

If you try to use your health savings plan funds for non-qualified medical expenses (which you can find in your plan details or on the IRS website), you must pay an income tax on those expenses, plus a 20% penalty.  

Flexible spending accounts do not have a tax penalty for non-qualified expenses. However, you may be required to repay the plan or have the amount included as taxable income. If you believe you have a qualified medical expense, you can submit a claim to get reimbursed for that expense. With an HSA, you’ll go through your plan administrator or trustee. With an FSA, file a claim through your employer.

HSAs vs. FSAs: A recap

	HSA	FSA
Eligibility	Enrolled in an HDHP but no other health insurance plan. Cannot be claimed as a dependent.	Full-time employee with an employer offering health insurance. Not enrolled in a health insurance marketplace plan.
Contribution limits and rules	$4,300 for self-coverage.  $8,550 for family coverage. $1,000 catch-up contribution (55 and up).	$3,300 in 2025 for individuals. $6,600 for household maximum.
Ownership	Self (but may be available through your employer).	Employer.
Tax advantages	Contributions are pre-tax.  Tax-free withdrawals on qualified medical expenses. Tax-free growth.	Contributions are pre-tax.  Tax-exempt medical expenses.
Investment options	Account funds can be invested and grow over time.	No investment option.
Employer contributions and portability	You can take the account with you if you change employers.  Employer may contribute.	You usually can’t keep the account if you change employers.  Employer may contribute.
Fund rollover	Funds roll over from year to year.	Depending on whether the plan allows rollovers, up to $660 may roll over from 2024 to 2025 (limits change each year).
Qualified expenses and penalties for non-qualified expenses	Qualified expenses include copayments, coinsurance, deductibles, certain prescription and nonprescription medications, some medical equipment, and other qualified medical and dental costs.  Generally won’t cover insurance premiums.  20% tax penalty for non-qualified expenses.	Qualified expenses include copayments, coinsurance, deductibles, certain prescription and nonprescription medications, some medical equipment, and other qualified medical and dental costs.  Generally won’t cover insurance premiums.

HSA or FSA? Which is right for me?

HSAs and FSAs both have a lot to offer. Both are tax-advantaged accounts designed to cover qualified medical expenses. All contributions are made using pre-tax dollars, meaning you can lower your taxable income for the current year. As long as you use your account funds for qualified medical expenses, you won’t be taxed on those withdrawals. 

However, these accounts have notable differences. If you’re choosing between the two, weigh factors like HSA vs. FSA tax benefits, eligibility requirements, and account limits to determine which is best for you. And remember, TurboTax can help you find any HSA- or FSA-related deductions when you file so you get the most savings—or biggest refund—possible. Learn more about filing taxes on your own or with an expert’s help using TurboTax.