HSA vs. FSA: What’s the Difference?

An employer-sponsored savings account might be the best way to pay for qualified medical expenses. If they offer a Health Savings Account (HSA) or Flexible Spending Account (FSA), then you have a choice on your hands. Which plan fits your lifestyle and prioritizes your health?

What They Have in Common

At their core, both are tax-advantaged accounts for qualified medical expenses. These options are provided by employers and used in conjunction with health insurance plans. Let’s break this down further. “Tax-advantaged” in this case means the contributions you put into this type of account reduces your taxable income. So, if your salary was $50,000 a year and you contributed $2,000 toward your HSA or FSA, then the taxable income is $48,000. This amount is put away and not touched until you have a “qualified medical expense.” These types of expenses can range from copays to medication to bandages. A list of qualified expenses can be found on the IRS website.


An HSA is a tax-advantaged savings account specifically for qualified medical expenses that can be paired with a high deductible health plan (HDHP). The money contributed, by the employee or employer, builds and builds and creates a nest egg to cover everyday medical expenses such as deductibles and copayments, prescriptions, and qualified medical equipment like a thermometer or bandages.


  • Tied to the employee, not the employer – If you decide to leave your job for any reason, the funds you contributed to your HSA follow you and you can still pay for qualified medical expenses.
  • Funds roll over and over, year after year – There isn’t a deadline for spending the money. You keep it until you spend it.
  • Earn more with your money! – The money you contribute to an HSA has the option to be invested or earn dividends.


  • Can only be used with HDHPs – You have to pay more before insurance kicks in.
  • You can only spend it on qualified medical expenses – If you spend the money from your HSA on a nonqualified medical expense, you will be taxed.


FSAs are also tax-advantaged accounts for qualified medical expenses and attached to an employer-based health plan. Much like an HSA, the funds contributed are to help pay for medical expenses like deductibles and copayments, prescriptions, and qualified medical equipment like a thermometer or bandages.


  • You have a lump sum of money – It works like a line of credit. If you spend a year’s worth of contributions in one doctor’s visit, then the funds will continue to come out of your paycheck until it is paid for.
  • Employers can double your money – It’s not required for employers to do so, but they can match your contributions up to double the amount.


  • Lose the account if you leave the employer – The funds won’t follow you if you change jobs or lose yours unexpectedly.
  • Lose the funds at the end of the year – If you don’t spend the money in the account by the end of the year deadline, then you lose your money.

Which Is For U?

While both are great options, more often than not, you can only pick one. An HSA is best for people who do not have many medical expenses, plan to move or switch jobs, or want to build a nest egg of savings and limited to an HDHP. An FSA is best for those who visit the doctor regularly and want employer contributions, if applicable.

The decision is up to you!