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

An HSA (Health Savings Account) and an FSA (Flexible Spending Account) are both tax-advantaged accounts that let you set aside pre-tax money for medical expenses. But they are not the same account, and the differences matter when you are choosing between them or deciding which one fits your situation.

The main split is this: an HSA is a savings account you own and control, even after you leave your job. An FSA is an employer-run benefit that you lose access to when you leave. An HSA requires you to be enrolled in a high-deductible health plan; an FSA works with any health insurance. An HSA has no annual spending important date; an FSA money expires at the end of the year (or after a grace period, depending on your employer's plan). These differences mean the two accounts serve different purposes and different people.

Key Takeaways

  • An HSA is your personal account that you keep even if you change jobs, while an FSA is tied to your employer and ends when you leave.
  • You can only open an HSA if you are enrolled in a high-deductible health plan, but you can use an FSA with any type of health insurance.
  • HSA money rolls over year to year and grows like an investment account, while FSA money is "use it or lose it" and expires at the end of the plan year.
  • Both accounts let you pay for the same medical expenses with pre-tax dollars, but the HSA gives you more flexibility about when and how you spend the money.

Who Can Open Each Account

To open an HSA, you must be enrolled in a high-deductible health plan (HDHP) as defined by the IRS. Your employer offers this plan during open enrollment, or you can buy one on your own through the health insurance marketplace. You cannot have other health coverage at the same time — no spouse's plan, no Medicare, no Medicaid — though there are narrow exceptions for accident, disability, and dental coverage. You also cannot be claimed as a dependent on someone else's tax return.

An FSA has no insurance requirement. You can open one if your employer offers it, regardless of what health plan you chose. You do not need a high-deductible plan, and you can have an FSA alongside any other insurance. This makes FSAs available to more people, but only if their employer runs the program.

How Much You Can Contribute Each Year

For 2024, the HSA contribution limit is $4,150 for individual coverage and $8,300 for family coverage. These limits change each year. If you are 55 or older, you can add an extra $1,000 per year (called a catch-up contribution). You can contribute through your employer's payroll, or you can contribute on your own and deduct it on your tax return. The money you contribute is not taxed, and any money you do not spend stays in the account and grows year after year.

For 2024, the FSA contribution limit is $3,300 per year. This limit also changes annually. You contribute through payroll deductions, and your employer may also contribute. Unlike the HSA, there is no catch-up contribution for older workers. The money you do not spend by the end of the plan year is forfeited, though some employers offer a grace period (usually two and a half months) to spend remaining funds.

Tax Treatment and How the Money Works

Both accounts offer the same tax advantage: money you contribute is not subject to federal income tax or payroll taxes (Social Security and Medicare). When you spend the money on a covered medical expense, you do not pay tax on that withdrawal either. The difference is what happens to money you do not spend.

With an HSA, unused money stays in your account forever. You can let it accumulate and invest it like a retirement account — many HSAs offer mutual funds and other investment options. If you withdraw money for a non-medical expense before age 65, you pay income tax plus a 20 percent penalty. After age 65, you can withdraw money for any reason without the penalty (though you pay income tax on non-medical withdrawals). This makes an HSA a powerful long-term savings tool.

With an FSA, you must spend the money within the plan year or lose it. Your employer may allow a grace period of up to two and a half months into the next year, but after that, any unspent balance is forfeited. You cannot carry money over, and you cannot invest it. This "use it or lose it" rule means you need to estimate your medical expenses accurately each year.

What Medical Expenses You Can Pay For

Both accounts cover the same types of medical expenses: doctor visits, prescriptions, dental work, vision care, mental health treatment, and medical equipment like crutches or hearing aids. The IRS publishes a full list of covered expenses, and both accounts follow the same rules.

The practical difference is flexibility. With an HSA, you can pay for an expense now and reimburse yourself later — you can even wait years to reimburse yourself, as long as you have receipts. With an FSA, you typically need to spend the money within the plan year, so you have less time to plan.

What Happens When You Leave Your Job

When you leave your job, your HSA stays with you. The account is yours, not your employer's. You can keep contributing to it if you remain enrolled in a high-deductible plan, and you can keep spending from it for the rest of your life. You can move the account to a different bank or investment firm if you want. This portability is one of the biggest advantages of an HSA.

When you leave your job, your FSA ends. You lose access to any unspent money in the account (with rare exceptions for COBRA continuation coverage). You cannot take the account with you or move it elsewhere. If you want an FSA at your next job, you will need to enroll in that employer's plan during open enrollment. This is a major limitation if you change jobs frequently.

Can You Have Both an HSA and an FSA at the Same Time

You can have both accounts, but with restrictions. If you have an FSA for general medical expenses, you cannot also have an HSA — the two accounts conflict under IRS rules. However, you can have an HSA and a limited-purpose FSA (also called a dependent care FSA or DCFSA) at the same time. A limited-purpose FSA covers only dental, vision, and dependent care expenses, leaving room for the HSA to cover everything else.

Some employers offer both accounts but require you to choose one. Others offer an HSA with a limited-purpose FSA. Check your employer's benefits guide or ask your benefits administrator which combination, if any, is available to you.

Frequently Asked Questions

Can I use my HSA to pay for my spouse's medical expenses?

Yes, as long as your spouse is your tax dependent. You can use HSA money to pay for your spouse's doctor visits, prescriptions, and other covered medical expenses. The same rule applies to your children and any other tax dependents. The expense must be covered under IRS rules, but the person receiving the care does not need to be on your health plan.

What happens to my FSA money if I do not spend it by the end of the year?

You lose it. Your employer keeps the unspent balance. Some employers offer a grace period (usually two and a half months into the next year) to spend remaining funds, but this is optional and varies by plan. Check your employer's FSA plan document to see if a grace period applies to you. This is why estimating your medical expenses carefully is important when you enroll in an FSA.

Can I invest my FSA money like I can with an HSA?

No. FSA money must stay in cash or a money market account. You cannot invest it in mutual funds or stocks. HSA money, by contrast, can be invested in a wide range of options depending on your account provider. This is one reason an HSA is better suited for long-term savings.

Do I need to submit receipts when I withdraw money from an HSA or FSA?

For an HSA, you do not need to submit receipts when you withdraw money, but you must keep them for your records in case the IRS audits you. For an FSA, your employer may require you to submit receipts or a letter from your provider to prove the expense is covered. Requirements vary by employer and plan. Ask your benefits administrator what documentation your FSA requires.

Can I open an HSA if I have Medicare?

No. Once you enroll in Medicare, you are no longer may be able to access to contribute to an HSA. However, if you already have an HSA, you can keep it and continue to withdraw money from it for medical expenses. You just cannot add new money to it after you enroll in Medicare.