FSA and HSA are separate accounts with different rules for who can open them, how much you can contribute, and when you can withdraw money

An FSA (Flexible Spending Account) and an HSA (Health Savings Account) both let you set aside pre-tax money for medical expenses, but they are not the same account. The main differences come down to who can open each one, how much you can contribute each year, whether the money rolls over, and what happens to unused funds.

The simplest way to think about them: an FSA is tied to your employer's health plan and you lose unspent money at the end of the year (with limited exceptions). An HSA is portable, the money rolls over indefinitely, and you can invest it like a retirement account. You cannot have both an FSA and an HSA in the same year, so understanding which one fits your situation matters.

Key Takeaways

  • An FSA requires you to be enrolled in a health plan through your employer, while an HSA requires a high-deductible health plan (HDHP) and can be opened by anyone with that coverage, including self-employed people.
  • FSA contributions are capped at $3,300 per year (for 2024), while HSA contributions are higher and depend on whether you have individual or family coverage, ranging from $4,150 to $8,300 per year.
  • FSA money does not roll over to the next year—you forfeit what you do not spend, though some plans offer a grace period or carryover of up to $640.
  • HSA money rolls over indefinitely and can be invested in stocks, bonds, or mutual funds, making it function partly like a retirement account.
  • Both accounts cover the same types of medical expenses, but only an HSA lets you withdraw money tax-free after age 65 for any reason.

Who can open an FSA versus an HSA

An FSA is offered through your employer's benefits plan. You must be enrolled in a health plan—any type—to open one. Your employer sets up the FSA program, and you enroll during open enrollment or when you first become may be able to access. If your employer does not offer an FSA, you cannot open one on your own.

An HSA is available only if you are enrolled in a high-deductible health plan (HDHP). The IRS sets the minimum deductible each year: for 2024, it is $1,600 for individual coverage and $3,200 for family coverage. You can open an HSA through your employer, a bank, an insurance company, or a financial services provider. Self-employed people and those with individual health insurance can open an HSA as long as they meet the HDHP requirement.

You cannot have an FSA and an HSA at the same time in the same year. If you have an FSA through your employer, you are not allowed to open an HSA that year. Some people switch from an FSA to an HSA if their employer changes plans or if they move to a job that offers an HDHP instead.

Annual contribution limits for each account type

FSA contribution limits are set by the IRS and change each year. For 2024, the limit is $3,300 per year. Your employer may set a lower limit, but cannot go higher. You decide how much to contribute during open enrollment, and that amount is deducted from your paycheck in equal installments throughout the year.

HSA contribution limits are also set by the IRS and vary by coverage type. For 2024, the limit is $4,150 for individual coverage and $8,300 for family coverage. If you are age 55 or older, you can contribute an additional $1,000 per year (called a catch-up contribution). Unlike an FSA, you can contribute to an HSA on your own schedule—you do not have to wait for open enrollment, and you can contribute even if your employer does not offer one.

Both accounts allow you to contribute only if you are covered by the plan for the entire year. If you enroll mid-year, your contribution limit is reduced proportionally.

What happens to money you do not spend

FSA money does not roll over. Any balance left in your account at the end of the plan year is forfeited—you lose it. This is called the "use-it-or-lose-it" rule. However, many employers offer either a grace period (usually 2.5 months into the next year to spend remaining funds) or a carryover of up to $640 to the next year. Your employer chooses which option to offer, if any. Check your plan documents to see what applies to your FSA.

HSA money rolls over indefinitely. Any balance you do not spend stays in the account year after year. The money accumulates, and you can invest it in the account's investment options (if your HSA provider offers them). This makes an HSA function partly like a retirement savings account—you can let it grow over decades and withdraw it tax-free for medical expenses whenever you need it.

Tax treatment and withdrawal rules

Both FSA and HSA contributions are made with pre-tax money, meaning they reduce your taxable income. Withdrawals from both accounts are tax-free as long as you use the money for may have access to medical expenses—the IRS maintains a list that includes doctor visits, prescriptions, dental work, vision care, and many other costs.

The key difference appears after age 65. With an FSA, once you turn 65, you can no longer make new contributions, but you can still withdraw money for may have access to medical expenses tax-free. With an HSA, after age 65 you can withdraw money for any reason without penalty, though withdrawals for non-medical expenses are taxed as ordinary income (the contribution itself remains tax-free).

If you withdraw money from either account for a non-may have access to expense before age 65, you pay income tax on the amount plus a 20% penalty on FSA withdrawals and a 20% penalty on HSA withdrawals. This penalty is the same for both accounts and applies only to non-may have access to expenses.

Portability and what happens when you change jobs

An FSA is tied to your employer. If you leave your job, your FSA ends. You have a limited time (usually 60 days) to submit claims for expenses you incurred while enrolled, but you cannot continue contributing or use the account after you leave. Any remaining balance is forfeited, except for amounts covered by a carryover or grace period if your employer offers one.

An HSA is portable and belongs to you, not your employer. If you change jobs, your HSA stays with you. You can keep the account open, continue to invest the money, and withdraw it for medical expenses whenever you need it. You can also roll an HSA from one provider to another without penalty. This portability is one of the main reasons some people prefer an HSA—the account can grow over your entire working life.

Which expenses both accounts cover

FSAs and HSAs cover the same types of may have access to medical expenses. Both can be used for doctor visits, hospital stays, prescription medications, dental work, vision care (including glasses and contacts), hearing aids, and many over-the-counter items like pain relievers and allergy medicine. The IRS publishes a full list of may have access to expenses on its website.

One practical difference: FSA funds are usually accessed through a debit card issued by your plan administrator, while HSA funds may be accessed through a debit card, check, or direct transfer depending on your provider. Some HSA providers also let you reimburse yourself from the account after paying out of pocket, which gives you more flexibility in how you use the money.

Frequently Asked Questions

Can I have both an FSA and an HSA at the same time?

No. If you are enrolled in an FSA, you cannot open or contribute to an HSA that same year. However, you can switch from one to the other if your coverage changes—for example, if your employer stops offering an FSA and switches to an HDHP, you could then open an HSA.

What if I do not spend all my FSA money by the end of the year?

You lose it, unless your employer offers a grace period or carryover. A grace period (usually 2.5 months) lets you spend remaining funds into the next year. A carryover lets you roll up to $640 to the next year. Check your plan documents to see which option your employer provides.

Can I invest HSA money like a retirement account?

Yes, if your HSA provider offers investment options. Many HSAs let you invest in mutual funds, stocks, or bonds once your balance reaches a certain amount (often $1,000 or $2,000). The earnings grow tax-free, and you can withdraw them tax-free for medical expenses at any age.

What happens to my FSA if I leave my job mid-year?

Your FSA ends when you leave. You have a limited window (usually 60 days) to submit claims for expenses you already incurred, but you cannot continue using the account. Any remaining balance is forfeited unless your employer's plan includes a carryover or grace period.

Can I use HSA money for expenses that happened before I opened the account?

Yes. You can reimburse yourself for may have access to medical expenses that occurred after you became may be able to access for the HDHP, even if you pay yourself back years later. Keep receipts and documentation in case the IRS asks for proof.