What’s the Difference Between an FSA and an HSA?
Health ConditionsGeneral HealthHealth Insurance

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

What’s the Difference Between an FSA and an HSA?
iStock; Everyday Health
By
Published on June 25, 2025
Reviewed by
There are two main types of accounts available for tax-free savings to use for health services: flexible spending accounts (FSAs) and health savings accounts (HSAs). Both allow you to set aside money before taxes as well as withdraw money tax-free to pay for healthcare costs. But there are key differences between the two account types.

FSA

An FSA is a workplace account that you get from your employer. It lets you save pretax income to use for medical expenses. It’s more like a spending account than a savings account, though: Typically, you must use the money you contribute within a year or you lose it.

How Does It Work?

At the beginning of the year, you decide how much money you want to put in your FSA. Your employer takes that amount out of your paycheck before the taxes on your earnings. You can use the money in your FSA to pay for qualified medical expenses throughout the year. Employers can also contribute to FSAs, but they aren’t required to do so.

The big advantage of an FSA is that you don’t pay federal, state, or Social Security taxes on the money you contribute and spend on medical purposes. FSAs can also be used alongside any type of employer health plan.

A disadvantage is that you can’t invest or earn interest on FSA funds. Moreover, if you don’t use all the money you deposit or you leave your job before spending it, you will likely lose it.

What Can FSA Funds Be Used For?

FSA funds can be used for qualified medical expenses, including the following:

You can’t use money from an FSA to pay insurance premiums, which are the payments you make each month to keep your insurance policy active. You might not be able to use FSA money for expenses like cosmetic procedures, supplements, and gym memberships.

What’s the Max You Can Contribute to an FSA?

The amount of money that you can put into an FSA is capped. In 2025, the limit is $3,300, but your employer can set a lower limit. If your spouse is offered an FSA, they can also contribute up to $3,300. The household FSA cap for 2025 is $6,600.

Even if you don’t put any money into your FSA, your employer can still contribute up to $500. However, pretax contributions from an employer that are more than $500 are restricted to a dollar-for-dollar match. That means you would have to contribute $1,000 for your employer to be allowed to chip in that same amount.

What Happens to Unused Funds?

Typically, FSAs have a use-it-or-lose-it policy, so any money that’s left over at the end of the calendar year is gone. That’s why it’s important that you only contribute an amount that you think you will spend.

However, there are exceptions. Some employers offer grace periods of up to two and a half months to use the money in the account. Others let employees carry over a portion of the unused money. The Internal Revenue Service (IRS) determines the maximum amount that can be carried over each year. Up to $660 can be carried over from 2025 to 2026.

Who Is an FSA Best For?

An FSA might be a good option if you meet any of these conditions:

  • Have an employer that offers this benefit
  • Want to save pretax income
  • Can somewhat predict what your health costs will be
  • Have a regular income
  • Can plan ahead

HSA

An HSA allows you to pay for medical expenses with tax-free funds. An HSA is only an option for people who have a qualified high-deductible health plan. The contributions you make to an HSA don’t have to be used within a particular time period; they are yours to keep indefinitely.

How Does It Work?

You put money into an HSA via paycheck deductions or a lump deposit. You can use this money for eligible health expenses. Your employer, family members, and anyone else can also add money to the account.

With an HSA, the funds you contribute are tax-free and can grow over time. Certain amounts may be invested, and your interest and earnings are tax-free if used on medical expenses.

 Another advantage is there’s no use-it-or-lose-it policy with an HSA. The money simply rolls over to the next year.

One potential drawback of an HSA is that you must have a high-deductible health plan. With these policies, you have to pay higher out-of-pocket costs before your coverage kicks in.

What Can HSA Funds Be Used For?

HSA funds can go toward many qualified medical expenses as defined by the IRS. Typically, you can’t use this money to pay insurance premiums, but you may be able to in some cases.

Importantly, when you turn 65, you can use the money in your HSA for anything, not just medical expenses. However, if you use the money to pay for purchases that aren’t medical, it counts as taxable income on your tax return.

Here are some common medical expenses that you can pay for with HSA funds:

  • Doctor’s visits, hospital stays, and copays
  • Deductibles and coinsurance
  • Medications and medical supplies
  • Eye exams and glasses
  • Dental work
  • Mental health services

What’s the Max You Can Contribute to an HSA?

There’s a limit to how much an individual and family can contribute to an HSA. In 2025, the individual maximum contribution amount is $4,300 and $8,550 for family coverage. People age 55 and older can make an additional contribution of $1,000 to catch up on their savings.

Though there are restrictions on how much you can add to your account each year, there’s no limit on how much you can save with an HSA over the long term.

What Happens to Unused Funds?

Unused HSA funds roll over from year to year. You don’t lose any of the savings you don’t use. In fact, the money stays in your account even if you change jobs, switch health insurance policies, or retire.

However, six months before retirement, you must stop contributing to your HSA. You can still use any money in your account to pay medical costs that Medicare doesn’t cover.

Who Is HSA Best For?

An HSA may be a good option if you meet these conditions:

  • Have a high-deductible health plan
  • Want to save tax-free money
  • Like the idea of growing your money over time
  • Want to save for future healthcare costs

How Do I Know Which Plan Is Right for Me?

You can’t have both an FSA and an HSA, so you’ll have to choose one or the other. The plan that’s right for you depends on your situation, preferences, and goals.

An HSA may be a better fit for someone who wants to grow their money and may not use their funds in a year’s time. If you can predict your estimated expenses and know you are going to use the money, an FSA could be a good option.

Keep in mind, you need a high-deductible health plan to qualify for an HSA. An HSA (and a high-deductible plan) can be funded on your own, unlike an FSA, which must be offered by an employer.


The Takeaway

  • Both FSAs and HSAs allow you to set aside tax-free money to pay for medical expenses.
  • With an FSA, you must use your funds within a year or you lose them. The money in an HSA is yours to keep forever.
  • To open an FSA, your employer must offer the option. With an HSA, you need a high-deductible health plan to qualify but can enroll in the plan and set up an HSA on your own.

Resources We Trust

EDITORIAL SOURCES
Everyday Health follows strict sourcing guidelines to ensure the accuracy of its content, outlined in our editorial policy. We use only trustworthy sources, including peer-reviewed studies, board-certified medical experts, patients with lived experience, and information from top institutions.
Resources
  1. HSA vs. FSA: Which Is Right for You? Fidelity.
  2. Using a Flexible Spending Account (FSA). HealthCare.gov.
  3. Flexible Spending Account (FSA). Healthnsurance.org.
  4. Flexible Spending Account vs. Health Savings Account. University of Utah.
  5. Eligible Health Care FSA (HC FSA) Expenses. U.S. Office of Personnel Management.
  6. Health savings account (HSA). Healthinsurance.org.
  7. Differences between HSAs, HRAs, and FSAs. United Healthcare.
  8. Understanding HSA-eligible plans. Healthcare.gov.
  9. Which Expenses Are Eligible for HSA, FSA, and HRA Reimbursement? Cigna Healthcare.
  10. Publication 969 (2024), Health Savings Accounts and Other Tax-Favored Health Plans. Internal Revenue Service. January 23, 2025.
Meet Our Experts
See Our Editorial PolicyMeet Our Health Expert Network
Sarah Goodell, MA

Sarah Goodell, MA

Reviewer

Sarah Goodell is a health policy consultant with over 25 years of experience. She is currently working as an independent consultant focusing on the Affordable Care Act, Medicare, health financing, and health delivery systems.

She previously served as director of the Synthesis Project, funded by the Robert Wood Johnson Foundation. At the Synthesis Project she managed projects on a variety of topics, including risk adjustment, Medicaid managed care, hospital consolidation, the primary care workforce, care management, and medical malpractice.

Prior to her work as a consultant, Ms. Goodell spent five years as a policy analyst in the Office of the Assistant Secretary for Planning and Evaluation (ASPE) at the U.S. Department of Health and Human Services. Her work at ASPE focused on private insurance and patient protections, including external appeals processes and privacy.

See full bio
julie-marks-bio

Julie Lynn Marks

Author

Julie Marks is a freelance writer with more than 20 years of experience covering health, lifestyle, and science topics. In addition to writing for Everyday Health, her work has been featured in WebMD, SELF, Healthline, A&E, Psych Central, Verywell Health, and more. Her goal is to compose helpful articles that readers can easily understand and use to improve their well-being. She is passionate about healthy living and delivering important medical information through her writing.

Prior to her freelance career, Marks was a supervising producer of medical programming for Ivanhoe Broadcast News. She is a Telly award winner and Freddie award finalist. When she’s not writing, she enjoys spending time with her husband and four children, traveling, and cheering on the UCF Knights.

See full bio
See Our Editorial PolicyMeet Our Health Expert Network