HSA vs FSA: what’s the difference?

A Health Savings Account (HSA) is a personal account you own and take with you. A health Flexible Spending Arrangement (FSA) is an employer-run benefit that generally resets every plan year.

The IRS describes an HSA as a tax-exempt trust or custodial account you set up with a qualified trustee, such as a bank or insurance company, to pay or reimburse certain medical expenses. It also notes the HSA is “portable”: it stays with you if you change employers or leave the workforce. An FSA, by contrast, is an employer-established plan, usually funded by salary reduction. (IRS Pub. 969)

“You can only spend what is in the account” is our plain-English reading of how an HSA works. It follows from the HSA being a funded account, and it contrasts with the FSA rule the IRS spells out in Pub. 969.

To contribute, the IRS says you must (1) be covered by an HDHP on the first day of the month, (2) have no other health coverage except what’s permitted, (3) not be enrolled in Medicare, and (4) not be claimable as a dependent on someone else’s return. (IRS Pub. 969)

What counts as “high deductible” changes each year. For 2026 an HDHP has a minimum annual deductible of $1,700 (self-only) or $3,400 (family), and its deductible plus other out-of-pocket costs (not premiums) can’t exceed $8,500 or $17,000. For 2027 those become $1,750 / $3,500 and $8,700 / $17,400. (Rev. Proc. 2025-19, Rev. Proc. 2026-24)

Each spouse who wants an HSA opens their own; there are no joint HSAs. And once you’re enrolled in Medicare, your HSA contribution limit is zero starting with that month. You can still spend what’s already in the account. (IRS Pub. 969)

Usually not a regular one. The IRS says an employee covered by an HDHP and a health FSA (or HRA) that pays or reimburses qualified medical expenses generally can’t contribute to an HSA. There are exceptions, though. You can still contribute to an HSA with a limited-purpose FSA, which covers things like dental, vision, and preventive care, or a post-deductible FSA, which doesn’t pay anything until you’ve met the HDHP’s minimum deductible. (IRS Pub. 969, “Other employee health plans”)

If your employer offers both, read the plan descriptions carefully. The label on the FSA matters. A spouse’s FSA that can reimburse your expenses is also worth asking HR about.

Both accounts pay for qualified medical expenses, but the details differ. On the HSA side, if you take money out for something that isn’t a qualified medical expense, you’ll owe income tax on it and generally an additional 20% tax. That additional tax doesn’t apply to distributions made after you are disabled, reach 65, or die. (IRS Pub. 969)

Neither account can generally be used to pay health insurance premiums. The IRS lists narrow HSA exceptions: long-term care insurance, COBRA continuation coverage, coverage while receiving unemployment compensation, and Medicare and other coverage if you’re 65 or older (not Medigap). For a health FSA, the IRS says you can’t get reimbursed for premiums or long-term care. (IRS Pub. 969)

• The FSA “use it or lose it” rule. If your plan has no carryover or grace period, unspent money is forfeited at the end of the plan year. For plan years beginning in 2026 the carryover cap is $680, and your plan may choose a lower amount or none. (Rev. Proc. 2025-32)
• The HSA is a long game. Because the balance carries over and goes with you, where you keep it (and what it costs) matters for years. Fees, cash rates, and investing options vary by provider. See HSA fees explained and should you invest your HSA.
• Your employer can limit the choice. Some employers pick one HSA provider for payroll deposits. You can still compare options and, if a move makes sense, learn how to transfer without surprise fees.

If you already have an HSA, see how its fees stack up in the provider directory, or estimate whether a move pays for itself with the move calculator.