HSA vs. FSA Explained: Key Benefits and Differences

Both an HSA (Health Savings Account) and an FSA (Flexible Spending Arrangement) allow you to save for health care expenses.

The main difference between an HSA and an FSA is that an HSA has higher contribution limits and gives you the ability to invest.

Meanwhile, the FSA only allows you to contribute money to the account and use that money to pay for medical expenses.

There are also differences in contribution amounts, employer contributions, and qualifications based on your health plan and employment status.

Let’s break down the main similarities and differences between HSA and FSA.

Quick Comparison: HSA vs. FSA

Here’s a quick breakdown:

What to know about HSA

HSA stands for Health Savings Account.

to Qualify for an HSAYou must have a high deductible health plan (HDHP). according to IRS Publication 969The minimum HDHP deductible must be $1,650 for individuals and $3,300 for families. You cannot be on Medicare or be claimed as a dependent. You can be self-employed with an HDHP that allows an HSA.

Why would someone choose an HDHP over a non-HDHP? This can be a personal preference or depend on how much you regularly spend on healthcare. If you rarely go to the doctor, an HDHP may make economic sense.

there Contribution limits For HSAs. It is worth $4,300 for individuals and $8,550 for families in 2025. There is also a catch-up contribution of $1,000 allowed if you are over 55.

In 2026, HSA contribution limits will rise again:

Your employer may offer an HSA with your health insurance plan. Some insurance plan titles state that an HSA is available. You can always check with your employer or insurance company as well.

An HSA allows you to take your HSA with you if you switch employers since the account is owned by you. Unused funds are also renewed every year.

You don’t have to be an employee to get an HSA. If you were recently laid off at $3,400 or are on COBRA with an HDHP, you can get an HSA if the plan allows it. If the plan doesn’t come with an HSA but allows an HSA, you’ll have to shop around at different banks for an HSA account.

There are some differences in HSAs when you are employed versus unemployed after you have been laid off. Without an employer, you would have to pay monthly fees to an HSA account and there would be no company match. However, you can convert your old HSA to a new HSA that may not have a monthly fee.

Can you withdraw money from your HSA for non-medical expenses? There is one condition that allows you to withdraw money from your account for non-medical expenses without incurring any penalty: You must be at least 65 years old. Funds withdrawn at age 65 or older can also be withdrawn tax-free.

On the other hand, if you’re not 65 or older and decide to withdraw money from your HSA for non-medical use, you’ll incur a hefty 20% penalty, which must be declared on your income.

Check out the full list of eligible HSA expenses before you worry about it.

The result is that you do your best to estimate how much money should go into your HSA each year and not exceed that amount. The last thing you want is to keep money in your HSA account that you need for something other than medical expenses.

Related to: How to use an HSA to invest for retirement

What do you know about the Free Syrian Army?

FSA stands for Flexible Savings Arrangements.

FSAs are provided through your employer. Unlike an HSA, you don’t have an FSA account. If you decide to leave your employer, the FSA will not go with you and you will lose your money, which is not the case with the FSA.

The Free Syrian Army’s money is not actually wasted. Instead, they return to their employer. The act of leaving a company without money is called an FSA Confiscation of the Free Syrian Army.

Whether or not FSA funds are rolled over each year is also up to your employer. In some cases, your employer may provide additional time in the upcoming year to use any remaining funds. This is called a gRace period It allows 2.5 months to use any rolling funds. Otherwise, this money goes back to the employer. In the case of the so-called Caccessup to $640 of carryover funds can be used in the new year, plus the contribution limit.

Contribution limits for FSAs are $3,300 for individuals in 2025, and you can only roll over $660 at the end of the year. You can change your contributions at open enrollment if your family situation changes, or if you change plans or employers.

In 2026, the FSA contribution limit will increase to $3,400. In 2026, you can transfer $680 in funds.

As for any penalties when the funds are used for non-medical expenses, that is up to the employer.

Finally, the employer can always set lower limits.

Can you have both an HSA and FSA?

generally, no – Unless the employer provides a FSA Limited Purpose To cover dental and vision expenses.
You can contribute to both an HSA and a limited FSA without violating IRS rules, as long as the FSA doesn’t reimburse for general medical expenses.

You can also take out an old HSA that you no longer use but continue to invest — you can’t make new contributions if you don’t have a qualified health insurance plan.

HSA vs. FSA – which one should I choose?

With its ability to roll over funds and go with you if you leave a company, an HSA offers greater flexibility compared to an FSA. It may be more difficult to qualify for than an FSA since you must have an HDHP and not be on Medicare or have dependents. However, self-employed people can have an HSA if their HDHP allows it.

FSAs are intended for employees only. Self-employed persons are not eligible. Funds are not rolled over at the FSA unless specifically permitted by the employer. If you decide to leave the company, you will leave any money in your FSA.

Bottom line: HSAs and FSAs both provide meaningful tax savings, but they serve different purposes.

• Choose HSA If you have a high-deductible health plan and want to build long-term savings for medical or retirement expenses.
• Choose the Financial Services Authority If you anticipate fixed annual health care costs and prefer immediate access to funds through your employer.

Whatever you choose, review your contributions each year and take full advantage of the tax breaks available in 2026.