Health Savings Accounts (HSAs) vs. Flexible Spending Accounts (FSAs)

Why it matters

• Health Savings Accounts (HSAs) and Health Flexible Spending Accounts (FSAs) can both save you money on qualified medical expenses. ¹
• To qualify for an HSA, you must have a high-deductible health plan.¹
• You can sign up for an HSA or FSA through your employer, but you can also acquire an HSA on your own. ¹

Health Savings Accounts (HSAs) and Health Flexible Spending Accounts (FSAs) can both save you money on qualified medical expenses.¹ So when it comes to HSA vs. FSA, which one should you choose? There are several differences between the two, and if you’re considering signing up for one, it’s good to know what those are.

As far as health savings account rules go, HSAs require you to have a high-deductible health plan (HDHP) with a minimum deductible of $1,400 for individuals and a minimum deductible of $2,800 for families.² If you have an HDHP, you can sign up for an HSA on your own or through your employer. Health FSAs don’t have any qualification requirements, but you have to sign up through your employer.¹ The HSA contribution limits for 2022 are $3,650 for individuals and $7,300 for families, with a catch-up provision of $1,000 for those 55 and older.³ A Health FSA currently lets you contribute up to $2,850 per year.⁴

Both types of accounts cover the same qualified medical expenses, which are defined by the IRS. And both let you make contributions pre-tax and use those contributions tax-free on qualified medical expenses. But HSAs also allow you to invest those contributions.¹ Growth on those investments isn’t taxed until you withdraw it, unless you wait to withdraw it until after age 65 — then it’s tax-free.⁵ HSAs have a few additional benefits that FSAs don’t. You can take your HSA with you if you change jobs, and any unused funds roll over to the next year.⁵ Most FSAs have a “use it or lose it” policy,¹ unless the employer offering the account offers a provision that would allow you to roll over up to $570.⁴

To know which one is right for you, it can be helpful to figure out what your employer offers, how much you’re planning to spend on eligible medical expenses, and if you’re thinking about changing jobs. Or you can consult a financial professional, who can help you determine the best approach for you.

Things to consider

• Both HSAs and FSAs let you make pre-tax contributions and don’t tax you on any money spent on qualified medical expenses.⁵
• HSAs also let you invest your contributions¹ and don’t tax growth on those investments until it’s withdrawn (unless it’s withdrawn after age 65 — then it’s tax-free).⁵
• In addition, HSAs go with you if you change jobs, and all unused funds roll over every year.⁵

¹ “Healthcare FSA vs. HSA – Understanding the Differences,” Forbes.com, July 2021
² “Why You Should Consider an HSA Even If You’re Not Rich,” Investopedia.com, March 2022
³ “IRS Announces 2022 Limits for HSAs and High-Deductible Health Plans,” SHRM, May 2021
⁴ “2022 Health FSA Contribution Cap Rises to $2,850,” SHRM, November 2021
^{5 “}HSA vs. FSA: Which is Better?” TheBalance.com, April 2022

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