Both HSAs and FSAs let you set aside pre-tax money for medical expenses, but they work very differently. HSAs require a high-deductible health plan but roll over forever and can be invested. FSAs don’t require special insurance but typically expire annually. For 2026, FSAs allow up to $3,400 in contributions while HSAs allow $4,400 (individual) or $8,750 (family). Choosing wrong could mean losing hundreds of dollars.
The Money You Might Be Leaving on the Table
Let’s say you spend $200 a month on prescriptions, doctor visits, and routine healthcare. That’s $2,400 a year. If you’re in the 24% tax bracket, you could save about $576 annually by using pre-tax dollars through an HSA or FSA.
Over a decade? That’s $5,760 you’re essentially giving away if you don’t take advantage of these accounts.
But here’s the catch: HSAs and FSAs work completely differently, have different rules, and choosing the wrong one for your situation could actually cost you money.
Let’s break it down so you can actually make an informed decision during open enrollment.
What’s an HSA?
A health savings account (HSA) allows you to save pre-tax dollars to use for healthcare expenses. But there’s a big catch: You can only contribute to an HSA if you’re enrolled in a high-deductible health plan (HDHP).
What Qualifies as a High-Deductible Plan in 2026?
Translation: If your health insurance has a low deductible (say, $500), you’re not eligible for an HSA. Period.
The Triple Tax Advantage
This is where HSAs get really interesting. HSAs have triple tax benefits: No taxes on the money you put in, it grows tax-free, and no taxes when used for medical bills.
Let’s break that down:
- Tax-free contributions: Money goes in pre-tax, lowering your taxable income
- Tax-free growth: You can invest your HSA funds, and your invested money grows tax-free
- Tax-free withdrawals: As long as you spend on qualified medical expenses, you never pay taxes
This makes HSAs one of the most tax-advantaged accounts available—even better than 401(k)s and IRAs in some ways.
2026 HSA Contribution Limits
HSA participants over the age of 55 can contribute an extra $1,000 a year for catch-up purposes.
The Big Deal: Money Rolls Over Forever
HSAs allow you to carry money forward indefinitely, so your funds are there for you year after year. Unlike FSAs, HSA funds can roll over when the year ends, and they usually have higher contribution limits than FSAs.
Even better: Even if you opened it through your company, your HSA (and everything inside of it) is yours forever—even if you leave your job.
What’s an FSA?
The good news? FSAs work with most health plans—you don’t need a high-deductible plan.
The not-so-good news? FSA funds usually expire at year-end, though some plans let you carry over up to $680 to the next plan year or offer a 2.5-month grace period.
2026 FSA Contribution Limits
In 2026, each employee can contribute up to $3,400 to their FSA.
The Upside: Immediate Access
Here’s where FSAs have an advantage over HSAs: Health care FSA funds are available to spend in their entirety at the beginning of your plan year.
Let’s say you elect to contribute the maximum $3,400 for 2026. That entire amount is there for you to spend on the first day your benefits begin.
With HSAs? You can only use what you’ve saved. HSA contributions accumulate only as you contribute.
The Downside: Use It or Lose It
Some employers offer relief: Employers can choose to give employees a “grace period” of 2.5 months to use their funds, or let employees carry over $680 of unused funds to the next year (2026 carryover amount), but not both.
And here’s a crucial detail: FSAs are owned by your company. If you leave your job, you forfeit all funds in the account upon your departure, unless you enroll in COBRA.
The Side-by-Side Comparison
| HSA | FSA | |
|---|---|---|
| 2026 Contribution Limit | $4,400 (individual) $8,750 (family) +$1,000 if 55+ | $3,400 |
| Health Plan Requirement | Must have HDHP (deductible $1,700+ individual, $3,400+ family) | Any health plan |
| Rollover | 100% rolls over forever | $680 max OR 2.5-month grace period (employer chooses) |
| Who Owns It | You (portable if you change jobs) | Employer (forfeit if you leave job) |
| Investment Option | Yes – can invest and grow tax-free | No |
| When Funds Available | Only what you’ve contributed so far | Full annual amount available day one |
| Who Can Contribute | You, your employer, or anyone | Mainly you (employer can also contribute) |
Can You Have Both?
Short answer: Yes, but only with a Limited-Purpose FSA.
You can also have a Dependent Care FSA alongside an HSA (for childcare costs).
The Power Combo
Pair an HSA with an LPFSA for dental/vision expenses while preserving HSA eligibility. This lets you maximize tax-advantaged savings for all your healthcare needs.
Plus, in 2026: The jump to a $7,500 Dependent Care FSA limit is significant for dual-income households with childcare needs.
Which One Should You Choose?
Choose an HSA if:
- You have or can get a high-deductible health plan
- You’re generally healthy and don’t have frequent medical expenses
- You want to invest the money for long-term growth
- You want flexibility (the money is always yours)
- You might change jobs and want to keep your account
- You’re thinking about retirement (HSAs can be used as a retirement account after 65)
Choose an FSA if:
- You don’t have or don’t want a high-deductible health plan
- You have predictable medical expenses each year (braces, regular therapy, known procedures)
- You need access to the full amount upfront
- You’re comfortable estimating your annual healthcare costs
- You don’t plan to change jobs this year
What Can You Actually Use These Accounts For?
This includes:
- Doctor visits and copays
- Prescription medications
- Dental and vision care
- Medical equipment (crutches, blood pressure monitors)
- Mental health services
- Physical therapy
- Chiropractic care
- Some over-the-counter medications (with restrictions)
For a complete list, check out IRS Publication 502.
What You CAN’T Use Them For
Generally, you can’t use HSA/FSA funds for:
- Cosmetic procedures (unless medically necessary)
- Gym memberships (with some exceptions)
- Health insurance premiums (except in specific circumstances with HSAs)
- Vitamins and supplements (unless prescribed)
How to Maximize Your HSA
Strategy 1: Pay Out of Pocket Now, Invest the HSA
If you can afford it, pay for medical expenses out of pocket and let your HSA grow invested. You can reimburse yourself years later (keep those receipts!) and the account grows tax-free in the meantime.
Strategy 2: Max Out Contributions
If you’re in the 24% tax bracket and max out a family HSA ($8,750), you save $2,100 in taxes immediately. That’s real money.
Strategy 3: Think of It as a Stealth Retirement Account
After age 65, you can withdraw HSA funds for non-medical expenses without penalty (though you’ll pay income tax, just like a 401(k)). This makes HSAs incredibly flexible for retirement planning.
Strategy 4: Invest Aggressively Early
The HSA account offers a triple tax benefit and you can invest money in an HSA. Start investing early and let compound growth work in your favor.
How to Maximize Your FSA
Strategy 1: Estimate Conservatively
Add up your predictable expenses:
- Regular prescriptions × 12 months
- Known procedures (dental work, new glasses)
- Therapy or specialist visits
- Only then add a buffer
Strategy 2: Spend Strategically Throughout the Year
Strategy 3: Stock Up Before Year End
If you’re approaching your plan year end with leftover FSA funds:
- Get new glasses or prescription sunglasses
- Stock up on contact lenses
- Schedule that dental cleaning or physical
- Buy eligible OTC items
Strategy 4: Know Your Plan’s Rules
Employees should understand plan rules, including grace periods or carryover provisions.
Special Considerations
If You’re Planning to Have a Baby
Pregnancy and delivery can easily cost thousands even with insurance. An FSA might make sense since you’ll have immediate access to the full annual amount. But make sure you time it right—if the baby arrives in January but your FSA resets in December, you’ll have to re-fund it.
If You’re Self-Employed
Self-employed people can have an HSA if their HDHP allows for it. FSAs are typically only available through employers.
If You’re Approaching Medicare Age
Common Mistakes to Avoid
Overfunding an FSA: You can’t get the money back. Be conservative.
Not investing your HSA: Prioritizing HSAs where possible, given their triple tax advantage and long-term growth potential.
Forgetting about carryover rules: Check if your employer offers the $680 carryover or 2.5-month grace period
Assuming any HDHP qualifies for an HSA: High-earning professionals should avoid a common mistake: assuming any HDHP qualifies for an HSA. If the plan has disqualifying features (e.g., first-dollar non-deductible coverage), you may not be HSA-eligible despite the “HDHP” label.
Not keeping receipts: You might need to prove expenses were qualified, especially with HSAs
The Bottom Line
If you qualify for an HSA (have that high-deductible plan), it’s almost always the better long-term choice because of the triple tax advantage, rollover ability, and investment potential.
If you don’t qualify for an HSA, or if you have significant predictable medical expenses, an FSA can still save you hundreds in taxes—just be careful not to overfund it.
The money you save? That’s real money you can put toward literally anything else—retirement, travel, that emergency fund, or just padding your checking account.
Don’t leave it on the table.
Additional Resources
- IRS Publication 502 – Medical and Dental Expenses
- Morningstar – HSA vs. FSA: How to Choose One
- Fidelity – HSA vs FSA Guide
- HealthCare.gov – Understanding High-Deductible Health Plans
Related WMN Articles:
- Your 2026 Side Hustle Tax Guide (So You Don’t Get Screwed)
- Why Women Retire with 30% Less Than Men (And What to Do About It)
- High-Yield Savings Accounts: Where to Stash Your Emergency Fund in 2026
Disclaimer: This article is for informational purposes only and is not intended as financial or tax advice. Consult with a qualified financial advisor or tax professional before making decisions about HSAs or FSAs.
