FSA vs HSA: The Difference

Short answer

Both an FSA and an HSA let you set aside pre-tax money for medical and dental expenses. The biggest difference: FSA money doesn't roll over after the year ends, that's the use-it-or-lose-it rule. An HSA balance carries over with no deadline, and it also requires a high-deductible health plan (HDHP), while an FSA works with any plan.

What FSAs and HSAs are and who can have one

An FSA (flexible spending account) and an HSA (health savings account) are both employer-sponsored programs that let you put money aside before taxes are taken out of your paycheck. HealthCare.gov's plain definition of an FSA: "an arrangement through your employer that lets you pay for many out-of-pocket medical expenses with tax-free dollars." An HSA runs on the same tax logic, with different account rules. You use that money to pay for eligible medical expenses, and you don't pay federal income tax on it.

The catch: they have different rules about how long you can keep the money and who can open one. An HSA requires you to be enrolled in a high-deductible health plan (HDHP), which typically means higher out-of-pocket costs but lower premiums. An FSA doesn't have that requirement. You can have an FSA if your employer offers one, regardless of what health plan you're on.

FSA eligibility

Your employer offers FSAs. You have to enroll during your plan year's open enrollment period or when you have a qualifying life event like a job change or marriage. Once you enroll, your FSA is active for that plan year, which is usually January through December.

HSA eligibility

To open an HSA, you must be enrolled in an HDHP through your employer or marketplace plan. IRS Publication 969 states the test plainly: you're eligible only if you're "covered under a high deductible health plan (HDHP)" on the first day of the month. In 2026, an HDHP means a deductible of at least $1,700 for individual coverage or $3,400 for family coverage, up from $1,650 and $3,300 in 2025. You can't be claimed as a dependent on someone else's tax return, and you can't be enrolled in Medicare.

How money goes in

With both an FSA and HSA, money comes out of your paycheck before federal taxes are calculated. Your employer might also contribute, but not always. For 2026, the IRS sets these contribution limits.

FSA contributions

For 2026, the IRS raised the ceiling: "the dollar limitation for voluntary employee salary reductions for contributions to health flexible spending arrangements increases to $3,400," up $100 from 2025's $3,300. Some employers add to that, but the limit stays the same. You decide how much to contribute when you enroll, and you commit to that amount for the plan year. You can't change it unless you have a qualifying life event.

HSA contributions

For 2026, you can contribute up to $4,400 if you have individual HDHP coverage, or $8,750 if you have family coverage, up from $4,300 and $8,550 in 2025. Some employers contribute on your behalf. If you're 55 or older, IRS Publication 969 adds a catch-up: "your contribution limit is increased by $1,000" for the year. Unlike an FSA, you can change your HSA contribution amounts at any time, and you can open an HSA on your own even if your employer doesn't offer one.

How money comes out and who files

Both accounts let you pay for eligible medical expenses. But the way the money gets to you and who handles the paperwork is different.

Using an FSA

Most FSAs come with a debit card that you can use at pharmacies, doctors' offices and online retailers. When you swipe the card, the transaction is checked against IRS rules in real time. If the item isn't eligible, the card declines. Some FSAs also let you pay out of pocket and then request reimbursement by submitting a receipt.

Using an HSA

HSAs usually come with a debit card, but the card works differently than an FSA card. Because HSAs are savings accounts, not spending accounts, many don't have built-in real-time checking. You might use the card or pay out of pocket and request reimbursement. You keep your receipts as proof of eligibility.

Getting reimbursed for items that need approval

Some medical expenses are eligible only with proof that a doctor recommended them. That's where a Letter of Medical Necessity (LMN) comes in. With a letter from a licensed clinician, you can get reimbursed for things like fitness memberships, ergonomic equipment, or dietary supplements, all reimbursable with a letter rather than outright. Burst files the reimbursement claim with your FSA, HSA or HRA administrator. The administrator pays you out of your account by deposit or check.

What happens at year end and when you change jobs

The biggest difference between FSAs and HSAs shows up at the end of the year and when you leave a job.

FSA: use-it-or-lose-it

Any money left in your FSA at the end of the plan year is gone. Your employer can't pay it back to you, and you can't roll it over to next year. A plan can soften that in one of two ways, never both: a grace period (usually 2.5 months into the next year) to keep spending the prior year's balance, or a carryover. For 2026, the IRS set "the maximum carryover amount is $680," up from $660 in 2025. Check your plan document for which one, if either, yours offers, because anything left after that is forfeited.

HSA: yours to keep

An HSA balance carries over automatically, with no deadline to spend it. If you don't spend it this year, it rolls into next year, and the year after that. You can build up thousands of dollars in an HSA over time and use it whenever you need to pay for eligible medical expenses. This is one reason HSAs are sometimes called an investment account for retirement healthcare costs.

When you leave your job

If you leave your job, your FSA usually stops. Your plan document sets a run-out window for submitting claims on expenses you already incurred, and after that any remaining balance is forfeited. An HSA is yours personally, not tied to your employer. When you leave, the HSA stays with you. You can keep it open, move it to another bank or brokerage, or roll it over to another HSA. You can continue contributing if you stay on an HDHP.

Side-by-side comparison

Where Burst fits

Where a purchase needs a letter of medical necessity to be reimbursed (gym memberships, massage, fitness and recovery equipment, sleep products), Burst writes the letter and files the claim. $35, refunded if no letter is issued or the claim is denied. See how a letter works.

Frequently asked questions

Can I have both an FSA and an HSA at the same time?

Not a regular FSA and HSA together, but you can have a limited-purpose FSA paired with an HSA. A limited-purpose FSA covers dental and vision expenses only, which leaves your HSA available for other medical costs. Some people set up this combination to take full advantage of both accounts.

What's the difference between an HDHP and a regular health plan?

Learn more in our HDHP guide. An HDHP has a higher deductible but lower premiums, and it's the plan type an HSA requires. If you're on a PPO, HMO or other plan, you can't open an HSA, but you can use an FSA.

If I leave my job, what happens to my FSA money?

It's gone. Your FSA is tied to your employer's plan. When you leave, you have a short window to submit claims for expenses you already incurred, but any unused balance is forfeited. An HSA is different. It stays with you.

How much should I contribute to an FSA?

Only contribute what you're confident you'll spend, because you lose what's left over. Track your medical expenses from the past year, then estimate conservatively for the coming year. Your employer might also set its own limit lower than the IRS maximum.

Can I use my HSA for retirement?

Yes. After age 65, you can withdraw HSA money for any reason without a penalty, though you'll pay income tax on non-medical expenses. This makes an HSA more flexible in retirement than an FSA, which has no retirement feature.

What counts as an eligible medical expense?

Both FSAs and HSAs cover doctor visits, prescriptions, dental work, vision care and many other expenses. Check the complete list for FSA and HSA eligibility. Some items like fitness memberships and supplements need a letter of medical necessity to be approved.

Keep reading: What's an FSA?, What's an HSA?, HDHP and HSA: A Complete Strategy Guide for Beginners, Complete List of FSA and HSA Eligible Items, and all guides on this topic.

Sources

• IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans (HDHP requirement to open an HSA, age 55+ catch-up contribution, HSA rollover mechanics, and the FSA carryover rule)

• HealthCare.gov Glossary: Flexible Spending Account (FSA) (Plain-language FSA definition and employer-sponsored nature)

• IRS: Tax Inflation Adjustments for Tax Year 2026 (One Big Beautiful Bill Act amendments) (2026 FSA contribution limit ($3,400), 2026 FSA carryover maximum ($680), 2026 HDHP minimum deductibles)

• IRS Revenue Procedure 2025-19 (2026 HSA contribution limits ($4,400 self-only, $8,750 family) and HDHP out-of-pocket maximums)