HSA vs. FSA: Which Health Account Should You Use?

HSAs and FSAs both let you pay for medical costs with pre-tax money, which is why people mix them up. But one is a portable long-term investment account and the other is a use-it-or-lose-it spending account, and the difference is big.

The health savings account (HSA)

An HSA is available only if you have a qualifying high-deductible health plan. It is the most tax-advantaged account in the entire tax code: contributions go in pre-tax, the money grows tax-free, and withdrawals for medical costs are tax-free too. The balance rolls over every year, the account is yours to keep even if you change jobs, and after age 65 you can withdraw for any purpose (paying ordinary income tax, like a traditional IRA).

The flexible spending account (FSA)

An FSA is offered through an employer and works with most plan types. You elect an amount for the year, it comes out of your paycheck pre-tax, and you spend it on eligible medical costs. The catch is the "use it or lose it" rule: unspent money is generally forfeited at year-end, though some plans allow a small carryover or a short grace period.

The key differences

An HSA is portable, rolls over, can be invested, and can become a stealth retirement account. An FSA is tied to your employer, mostly expires each year, and cannot be invested. The FSA's one edge: the full annual amount is available on day one, before you have contributed it all.

Which to choose

If you have a high-deductible plan, the HSA is almost always the better long-term choice, and many people pay current medical costs out of pocket while letting the HSA grow as an investment. Choose an FSA when your plan is not HSA-eligible but you still want to pay predictable medical or dependent-care costs with pre-tax dollars.

Can you have both?

Generally not a regular HSA and a regular FSA at the same time, because the FSA disqualifies you. The exception is a "limited-purpose" FSA (dental and vision only), which is allowed alongside an HSA.

Estimate the tax savings with our HSA calculator and FSA calculator.