HSA vs. FSA: What’s the Difference?

Flexible spending accounts (FSAs) and health savings accounts (HSAs) have a lot in common. They’re both pre-tax accounts that you contribute money to, which you then use to cover healthcare costs. This could be anything from the copay on a doctor’s visit to a box of Band-Aids.

But they don’t work exactly the same way. As Forbes explains, an FSA is always set up through—and therefore is essentially owned by—your employer. If you don’t spend your annual balance by the end of the year, you lose it (though there may be a grace period so you can keep spending partway into the next year). And if you leave your job, you also leave behind whatever’s in your FSA (though there may be opportunities for grace periods in this case, too).

Some employers do offer HSAs, but you can also set one up yourself, usually through a bank. Either way, it’s totally yours. Whatever money is in your account rolls over from year to year, and it won’t disappear if you leave your job. However, not everyone qualifies for an HSA. You can’t be a Medicare member, you can’t be listed as a dependent on another person’s tax return, and you absolutely must be covered by a high-deductible health insurance plan (HDHP). As for what’s considered an HDHP, the IRS decides the minimum deductible and maximum out-of-pocket expenses on a yearly basis [PDF].

The IRS also decides the annual contribution limits for FSAs and HSAs. In general, you can put more into an HSA. The 2022 limit is $4150 for a single person’s HSA, as opposed to $3200 for an FSA. Typically, with an FSA, you pick an amount for the entire year, and it’ll come out of your paychecks in increments. But as Aetna points out, it’s basically a credit system: You can spend more than what’s actually in your account, as long as it’s less than what you’ve committed to depositing by the end of the year.

With an HSA, you can only spend what you’ve already deposited. If there’s not enough in your HSA to cover a certain expense, however, you can pay a different way and just reimburse yourself from your HSA later—there’s no time limit for filing a reimbursement claim. You can also earn interest on and even invest your HSA funds; FSAs don’t have either capability.

While it might seem like HSAs have a clear edge over FSAs, choosing the best one depends on personal factors. Maybe your employer contributes to FSAs, but not HSAs; or maybe you and your dependents spend a lot of time in and out of the doctor and an HDHP just isn’t right for you.

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A version of this story ran in 2021; it has been updated for 2023.