HSA vs. FSA: Which Is Better? (2023)

Depending on the kind of health insurance plan you have and the benefits your employer offers, you might be eligible for a health savings account (HSA) or a flexible spending account (FSA). Taking advantage of these accounts can help you save money and prepare for medical expenses that come up during the year.

HSAs and FSAs have different qualifications and advantages, however. Here's everything you need to better understand HSAs and FSAs before signing up.

Key Takeaways

  • HSAs and FSAs are both tax-advantaged savings accounts for medical expenses.
  • You must have a high-deductible health plan to contribute to an HSA.
  • HSA funds can carry over from year to year and employer to employer, and you can withdraw funds after age 65 to use them for non-medical purposes without paying a penalty.
  • FSAs are typically offered by employers, and funds typically don't carry over in full from year to year.
  • If you don't have access to an HSA, an FSA might be an option.

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

Qualifications or RequirementsA high-deductible health plan (HDHP) is required. The minimum deductible to qualify is $1,400 for individual plans or $2,800 for family plans. You can't be enrolled in Medicare and you can't be declared a dependent on another person's plan.No requirements; usually offered through a group or employer.
What if You Change Employers?Unused money in an HSA stays with you even if you change employers.FSAs do not follow you to your new employer, so you may lose any money in the account that you don't use.
Rollover RulesUnused funds in your HSA will roll over every year and can be saved in your account for the long term.For tax year 2022, you can typically carry $570 into the next plan year or employers may allow an additional two-and-a-half months to spend the previous year's contributions, depending on what the employer allows. In some cases, there are special rules allowing all funds to be carried over if the employer allowed it.
Annual Contribution LimitsFor 2022, the annual contribution limits are $3,650for individual plans and $7,300 for family plans.For 2022, the individual FSA contribution limit is $2,850. It is up to your employer to allow contributions up to that limit or not.
Changes to ContributionsYes, as long as contributions are below the annual limit.Generally, changes can only be made during open enrollment, unless you have a qualifying life event, or you change your plan or employer.
Long-Term Savings PotentialYesNo
Penalty for Using the FundsPrior to age 65,funds you use for non-medical expenses must be declared on your tax return, and are subject to a 20% penalty. Accumulated savings can be withdrawn after age 65 in retirement and used without penalty.Penalties may depend on your employer and FSA. Contact your plan administrator or employer for details.
Tax SavingsContributions can be made pre-tax directly from your paycheck. Contributions are tax-deductible and grow tax-deferred. Accumulated savings can be withdrawn tax-free after age 65. Funds used for qualified medical expenses are not taxed.Contributions can be made pre-tax directly from your paycheck. Funds used for qualified medical expenses are not taxed.
Special NotesHSAs may be accessible in different ways; be sure to ask if you will have a debit card and how expenses and reimbursements work.FSAs may allow a small carryover or grace period. However, this is at the discretion of the plan administrator or employer, so contact yours for details.

Qualifications or Requirements

To be eligible for a health savings account, you must choose a high-deductible health plan (HDHP). You can't be declared a dependent on someone else's plan and you can't be enrolled in Medicare, either. You can open an account through your employer or on your own, and the minimum deductible for tax year 2022 is $1,400 for individuals and $2,800 for families.

You can only open a flexible spending account through your employer or other group offering it, but there are no additional qualifications or restrictions as there are with an HSA.

Qualified Health Expenses

HSAs and FSAs are meant to cover qualified health expenses. Health insurance premiums typically aren't considered a qualified medical expense by HSAs unless you're paying for certain types of coverage like COBRA or receiving unemployment. You can pay for prescription medications, including insulin, with both types of accounts. Over-the-counter medicine and menstrual care products are also qualified expenses.

You can typically use the accounts to cover copayments and deductibles for doctor visits and hospital stays. Essential dental care is considered a qualified health expense, but teeth whitening isn't. Eyeglasses are also a qualified expense. In general, if it's something you could deduct as a medical expense on your taxes, you can use HSA or FSA funds to pay for it.


You can withdraw funds from an HSA to use for non-medical spending, but you will pay income tax and a 20% penalty until age 65. After age 65, you only pay income tax on amounts you withdraw for non-medical reasons, so an HSA could also be an additional source of retirement funds.

(Video) HSA vs FSA: Which One Should You Get?


Because both types of plans offer a tax-free way to save for medical expenses, both come with restrictions. However, generally, FSAs are the more restrictive of the two plan types. For instance, you can't transfer your FSA to a new employer when you change jobs and you can only change your contribution during open enrollment or when you have a qualifying life event such as getting married or having a child. These limits don't apply to HSAs.

The biggest difference between the two accounts, though, are contribution limits and how long your money can stay in the account. You can put more into an HSA each year and roll over your leftover balance at the end of the year.

For tax year 2022, the annual contribution limit for an HSA is $3,650 for individuals and $7,300 for families. For an FSA, the tax year 2022 annual contribution limit is $2,850.

With an FSA, your contributions are limited to $2,800. Employers may allow you to carry over up to $570 (in tax year 2022) to the next plan year or allow you a two-and-a-half month grace period to spend the previous year's funds.

Tax Incentives and Savings Potential

Both HSAs and FSAs offer the same tax advantages upfront—you can put money into the accounts and withdraw it to pay medical expenses tax-free. However, HSAs offer far greater tax advantages and savings potential.

Because you can roll over your balance each year, your HSA becomes another savings vehicle within your broader financial portfolio. This money also grows tax-deferred, meaning you won't pay any taxes on the growth until you withdraw the money. However, if you wait to withdraw that money after age 65, during retirement, you can withdraw it tax-free. Because of these features, many people use an HSA as a secondary retirement savings account.


With both HSAs and FSAs, you benefit from tax savings because the funds you deposit are pre-tax. That means they're deducted from your income before taxes are taken out. This reduces the amount of your taxable income.

Which Is Right for You?

Overall, HSAs are more flexible. You pre-tax contributions lower your tax bill, and you can use an HSA to save money. Also, you can roll over unused money. You do have to have an HDHP, though, and not everyone is comfortable with a high-deductible insurance plan.

An FSA doesn't build up over time, and you can lose leftover funds at the end of the year. You also stand to lose your FSA if you change employers. An FSA offers tax savings and budgeting for medical expenses, so if you don't qualify for an HSA, an FSA may be an alternative.

(Video) HSA vs FSA

Impact of the CARES Act on FSAs and HSAs

One crucial change applied to telehealth appointments. Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, patients with high-deductible health plans paired with HSAs can have telehealth appointments before they meet their deductible. The second provision allows over-the-counter medical products as eligible expenses for HSAs and FSAs without a prescription, something not available before the new law.

On December 27, 2020, theConsolidated Appropriations Act 2021was signed into law, which impacted some CARES Act provisions. Under this, taxpayers with FSAs and dependent care flexible spending accounts could roll over funds from 2020 to 2021 and from 2021 to tax year 2022.

Frequently Asked Questions (FAQs)

What expenses are HSA eligible?

Qualified medical expenses and some insurance premiums are HSA-eligible. Long-term care insurance premiums, COBRA premiums, and health insurance premiums while you're on unemployment, are all eligible. The IRS considers medical expenses to be the "costs of diagnosis, cure, mitigation, treatment, or prevention of disease."

What Is covered by an FSA?

FSAs cover the same expenses as HSAs, which are qualified medical expenses and some insurance premiums. Qualified medical expenses include prescriptions, ambulance services, and various types of therapy. Like HSAs, FSAs don't cover care that isn't medically necessary, including cosmetic surgery, gym memberships, maternity clothes, or nutritional supplements.

Can you have an HSA and an FSA at the same time?

You can only have an HSA and an FSA at the same time if theFSA is designatedas a limited-purpose FSA. These FSAs must have a specified purpose, such as covering long-term care costs rather than the regular medical expenses being covered by the HSA.

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Why would someone choose an FSA over an HSA? ›

Your FSA is owned by your employer. Your HSA account is owned by you and is portable, which means if you separate from your job you can take your HSA funds with you. Contributions made to an FSA are tax-free—not subject to payroll or income taxes.

What is better HSA or FSA? ›

Overall, the higher limits and contribution rollover of the health savings account make it a better choice if you can qualify. HSAs are more flexible than FSAs, allowing you to save for potential medical expenses and accumulate money over time.

What is the biggest difference between an FSA and an HSA? ›

FSAs are employer-sponsored plans, and HSAs are owned by you. Therefore, when you change employers, you can take the HSA with you, but any funds contributed to your FSA generally must be spent.

What is the downside of an HSA? ›

The main downside of an HSA is that you must have a high-deductible health insurance plan to get one. A health insurance deductible is the amount of money you must pay out of pocket each year before your insurance plan benefits begin.

Can HSA be used for dental? ›

A flexible savings account (FSA) and health savings account (HSA) can help reduce your out-of-pocket costs for dental care. You contribute pretax dollars to the accounts and use the money to pay for eligible dental expenses during the year.

Is FSA worth having? ›

If you have any ongoing or expected medical needs you might have to pay for in the upcoming year, an FSA is a great use of your money. The funds can also be used for over-the-counter items such as allergy and sinus drugs, first-aid supplies, digestive health products and home COVID-19 tests.

What is the downside of FSA? ›

Disadvantages. The amount you can contribute is less than in an HSA. You lose money if you don't use the contributions to pay for qualified health expenses within the plan year. You can't grow FSA contributions by investing them in stocks.

Should I get both HSA and FSA? ›

HSA + FSA perk #1: Save more money

By pairing your HSA with a limited FSA or combination FSA, you put aside even more pre-tax dollars beyond what just an HSA allows. Eligible expenses for each of the two FSAs are: A limited FSA covers dental, vision and preventive care expenses.

Is it better to not spend HSA? ›

Save: Prepare for health care needs in the future

If you don't spend the money in your account, it rolls over year after year. You can use HSA funds to pay for qualified medical expenses anytime—and that can be in the current year, next year or even during retirement.

Why is an HSA worth it? ›

A health savings account (HSA) is a type of bank account that helps you reduce your taxable income while saving money on a range of health care expenses. By using an HSA, you could save $840 per year on taxes, and a family could save $1,679 per year. Money in an HSA can also roll over from year to year.

What happens to unused FSA funds? ›

Where does the money go? Unused FSA money returns to your employer. The funds can be used towards offsetting administrative costs incurred during the plan year, employers can also reduce annual premiums in the next FSA year, or funds must be equally distributed to employees who enroll in an FSA for the next year.

What happens to money in HSA if not used? ›

HSA money is yours to keep. Unlike a flexible spending account (FSA), unused money in your HSA isn't forfeited at the end of the year; it continues to grow, tax-deferred.

How much should I put in my HSA per month? ›

How much should I contribute to my health savings account (HSA) each month? The short answer: As much as you're able to (within IRS contribution limits), if that's financially viable.

How much money in HSA is enough? ›

Here's where the guesswork comes in: Think about your medical history and your family's history of longevity. Use that information to choose an HSA savings goal. The number should be between $150,000 and $1 million if estimating for you and a spouse. Adjust down if you're estimating for yourself only.

Can I buy groceries with my HSA card? ›

No, you can't use your Flexible Spending Account (FSA) or Health Savings Account (HSA) for straight food purchases like meat, produce and dairy. But you can use them for some nutrition-related products and services. To review, tax-advantaged accounts have regulatory restrictions on eligible products and services.

Does HSA cover electric toothbrush? ›

Electric toothbrushes are not eligible for reimbursement with flexible spending accounts (FSA), health savings accounts (HSA), health reimbursement accounts (HRA), dependent care flexible spending accounts, and limited-purpose flexible spending accounts (LPFSA) because they are general health products.

Can I buy vitamins with HSA? ›

According to the IRS, you cannot use your HSA to pay for vitamins or supplements that are taken for general health. However, you can use your HSA to pay for vitamins or supplements that have been recommended by a health professional to treat or prevent a specific condition.

Does FSA hurt your credit? ›

Does Your FSA Card Impact Your Credit? “While FSA cards look and behave like credit or debit cards where they're accepted,” says credit scoring expert Barry Paperno, “like debit cards, they don't appear on your credit report or get included in your credit scores.

Does FSA lower your paycheck? ›

A Flexible Spending Account (FSA), sometimes referred to as a "Cafeteria Plan" or "Section 125 Cafeteria Plan", helps you keep more of your paycheck by reducing your Federal and state taxes. It allows you to pay certain expenses before taxes are deducted from your paycheck.

Can FSA be used for dental? ›

Facts about Flexible Spending Accounts (FSA)

You can use funds in your FSA to pay for certain medical and dental expenses for you, your spouse if you're married, and your dependents. You can spend FSA funds to pay deductibles and copayments, but not for insurance premiums.

Are HSA plans worth it? ›

There's a triple tax advantage

First, contributions to an HSA are federally tax-deductible, reducing your taxable income. Depending on where you live, you may also get a break on state income taxes. Second, both contributions and earnings grow federal tax-free.

What happens if I switch from FSA to HSA? ›


You cannot make any new contributions to your HSA account once the FSA plan year begins. However, you still own the HSA account and can continue to spend its balance on qualified healthcare expenses.

Can I max out FSA and HSA in same year? ›

Not Allowed. You can't contribute to a Health Savings Account (HSA) and have a general purpose Health Flexible Spending Account (FSA) for overlapping months.

Why would anyone get an FSA? ›

A Flexible Spending Account (FSA, also called a “flexible spending arrangement”) is a special account you put money into that you use to pay for certain out-of-pocket health care costs. You don't pay taxes on this money. This means you'll save an amount equal to the taxes you would have paid on the money you set aside.

Why would anyone use an FSA? ›

As an account holder, an FSA helps you pay for things you likely already have to pay for, but now you get to do it tax free. There are hundreds of eligible expenses for tax-free purchase with your health care FSA funds, including prescriptions, doctor's office copays, health insurance deductibles, and coinsurance.

What is the benefit of healthcare FSA? ›

An arrangement through your employer that lets you pay for many out-of-pocket medical expenses with tax-free dollars. Allowed expenses include insurance copayments and deductibles, qualified prescription drugs, insulin, and medical devices.


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