Both help save money on taxes and health-related expenses, but they work differently.

In 2026, more people became eligible to contribute to a Health Savings Account, or HSA, to cover certain medical expenses. It sounds similar to an FSA, a Flexible Spending Account, which also can be used for health-related expenses, but the two types of accounts work differently.

How they’re alike

HSAs and FSAs are both funded with tax-deductible contributions. Income deposited in either type of account isn’t subject to income tax. Also, there’s no tax when account holders withdraw funds for eligible expenses. Using an HSA or FSA helps stretch dollars to cover out-of-pocket health expenses and reduce income tax.

How HSAs and FSAs are different

HSAs and FSAs are set up and operate very differently.

An HSA is owned by the individual. Funds deposited are theirs. Always. Unused funds remain in the account from year to year.

FSAs are owned by employers. Folks who contribute to an FSA should carefully estimate their eligible expenses because unused funds don’t roll over to the next year. It’s a use-or-lose it scenario. However, when you enroll in an FSA, the amount of your annual contribution is available to spend at the beginning of the year. Technically, you could use the entire amount on the day benefits begin.

With an HSA, you only have access to the funds that have been deposited.

Another key distinction of HSAs is that the money in the account can be invested, much like retirement savings. The ability to invest provides an opportunity for growth, and any gains from investments in an HSA accumulate tax-free, giving these accounts a third tax advantage. There’s no income tax for contributions, withdrawals for eligible expenses or investment gains.

Who can contribute to healthcare savings accounts?

Certain requirements must be met to contribute to each type of healthcare account. Only people with a qualifying high-deductible health insurance plan can contribute to an HSA. FSAs are only available through an employer. Not all employers offer an FSA.

Contribution limits for HSA and FSA accounts

Of course, when there’s an ability to set aside income tax-free there are limits. HSA and FSA limits are treated differently by the IRS.

There are two categories for HSA contributions: individuals and families. For 2026, the respective limits are $4,400 and $8,750.

FSA limits are per person, rather than per family. For 2026, the FSA maximum contribution is $3,400. In households where two spouses have access to an employer-sponsored FSA plan, each partner can contribute up to $3,400. In some cases, employers may have a maximum contribution amount that’s lower than $3,400.

Limits for HSAs and FSAs are adjusted for inflation annually.

Can you have both an HSA and FSA?

You can have both an HSA and FSA, but in most cases, enrollment in a general-purpose healthcare FSA makes you ineligible to contribute to an HSA during the same tax year.

An exception is a limited-purpose FSA, which is designed to cover eligible dental and vision expenses. You may contribute to both an HSA and a limited-purpose FSA during the same tax year. Likewise, participation in a Dependent Care FSA does not affect HSA eligibility.

Employees need more HSA and FSA financial literacy

Frequently, employees don’t understand the difference between an HSA and an FSA. When employers roll out the two types of accounts at the same time it can contribute to a lack of clarity, according to Employee Benefit News. To boost employee financial literacy about healthcare accounts, employers should send multiple messages throughout the year, advises the SHRM.

Consumers business members can financially empower their employees with Consumers @Work. It’s a free educational program designed to improve financial fitness. To learn more, talk to a member of our team.

 

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