What's the difference between an FSA and an HSA?
(NewsNation) — Who doesn't want to save money? Especially when you're paying for something you don't want to — like medical or dental expenses. That's where flexible spending accounts and health savings accounts come into play.
FSAs and HSAs are both tax-free savings plans that help decrease the amount you pay out-of-pocket for some health care costs.
What is an FSA?
An FSA, or a flexible spending account, is an employer-sponsored financial account, meaning you contribute money through your job's health insurance plan. It is limited to $3,300 per year per employee and must be used within the health care plan year, making it a use-it-or-lose-it option.
“Don’t put more money in your FSA than you think you’ll spend within a year on things like copayments, coinsurance, drugs, and other allowed health care costs,” the Health Insurance Marketplace, which is government-sponsored, advises.
FSA contributions are not taxed, so you save a little money when paying for health care.
FSAs are only an option for those with insurance plans through their workplace, not the Marketplace.
Alternatively, health savings accounts, or HSAs, can be an option for those with Marketplace plans.
What is an HSA?
A health savings account, or HSA, lets those with a high-deductible health plan set pre-tax money aside to pay for medical expenses, from Band-Aids and Tylenol to doctor's office visits.
For 2025, the Internal Revenue Service defines a high-deductible health plan as any plan with an annual deductible of at least $1,650 for an individual or $3,300 for a family.
HSAs have some of the best tax benefits, offering a triple-tax advantage:
- Tax-free contributions: You can contribute pre-tax dollars via payroll deductions.
- Tax-free growth: Earnings from interest or investments are not taxed.
- Tax-free withdrawals: The money you take out is tax-free as long as it’s used for qualified medical expenses.
The contribution limits are $4,300 for individuals and $8,550 for family coverage.
HSAs are not use-it-or-lose-it plans; your money will remain in the account after the plan's calendar year.
What are the differences?
| Flexible Savings Account | Health Savings Account |
| Offered for those with employer-sponsored health insurance plans | Offered for those with health insurance through either a workplace or the Marketplace |
Contribution limit: $3,300 per person per year | Contribution limit: $4,300 per person per year |
| Use the money or lose it | No time frame for using the money |
| Tax-free contributions | Tax-free contributions |
For more information, visit the IRS website.