HSA vs FSA: Which One Should I Get?


As healthcare costs continue to rise, finding effective ways to manage medical expenses and save on taxes is crucial. Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) are two popular options that offer tax advantages while helping you cover out-of-pocket healthcare costs. But which one is the better choice for you in 2024? Read on to find out.

What are HSA and FSA?

HSA and FSA are accounts that you can use to pay for medical expenses or childcare costs. The money usually comes out of your paycheck into these accounts. You may ask why you would use these accounts instead of just paying for these costs directly.

What are the benefits of HSAs and FSAs?

The main benefit of both of these accounts is that they can lower your income tax bill! If you contribute $3,000 to an FSA, your taxable income is lowered by $3,000. With an HSA, it gets even more interesting.

HSAs have what we call a triple tax advantage: If you contribute $3,000 to an HSA, your taxable income is lowered by $3,000. In addition, if you choose the right HSA provider, you can invest those HSA dollars in stocks or bonds and potentially grow that money. No taxes are being paid while you earn dividends or generate capital gains. In addition, the money you potentially make from those investments is tax-free! How awesome is that? I love HSAs.

The HSA downside: Not everyone is eligible.

Who is eligible for a Health Savings Account?

To be eligible for a health savings account, you’ll need to have a high deductible health insurance plan PLUS your health insurance plan needs to be HSA-eligible.

A common mistake people make is assuming that their high deductible health plan makes them automatically eligible for an HSA. A high deductible plan doesn’t necessarily mean it’s HSA eligible. Some high deductible plans have cost-sharing agreements, meaning you get discounts on certain medical costs, which make it ineligible for an HSA.

For example, I have a high deductible plan with CareFirst, but it’s not HSA eligible. I was very sad that I couldn’t contribute further to my HSA. One trick to quickly find out if you’re eligible for an HSA: If your health insurance card has the word HSA in the name of the plan, most likely you’re eligible for a health savings account. It doesn’t always have this in the name if it’s eligible, but if it does, you know it’s likely eligible.

Who can have a Flexible Savings Account?

FSA accounts are only available through your employer. If your employer offers it as part of your benefits package, then you are eligible to contribute to it. If not, there’s really nothing you can do; you can lobby them to offer one, but you cannot get an FSA in the open market.

What is the contribution limit for HSAs and FSAs in 2024?

HSA contribution limit:
Individuals can contribute up to $4,150, and families can contribute up to $8,300 to their HSA accounts. 

FSA contribution limit:
An employee can contribute up to $3,200 in an FSA for 2024. 

These contribution limits are set by the IRS and may be subject to change in subsequent years. 

What are qualified HSA and FSA expenses?

What types of medical expenses are HSA and FSA eligible for? There are many things you can use the funds in these accounts for:

  • Dental: If you have your teeth cleaned, have your wisdom tooth removed, or your dentist said it’s time for an X-ray, these are all qualified HSA and FSA expenses. You can even use it for big bills like braces! You can also use your FSA funds to pay for copayments and deductibles, but not for insurance premiums.
  • Vision: Eyeglasses, contact lenses, and laser eye surgery are all eligible expenses.
  • Medical: FSAs and HSAs can be used for most types of out-of-pocket medical expenses. Fun Fact: PPEs such as face masks and hand sanitizer are now eligible HSA and FSA expenses, under the new IRS guidelines. Drug prescriptions, feminine hygiene products, guide dogs, and insulin are eligible expenses. Even things like Tylenol, physical therapy, acupuncture, chiropractic treatments, and mental health treatment are all eligible.
  • Medical Devices: For example, crutches. I sprained my ankle once really badly from basketball. I had to use 2 crutches, and walking half a mile to the metro can feel like an eternity! If you have to pay out of pocket for the device, and a doctor prescribes it, it is usually covered.
  • Family planning: You can use your HSA and FSA funds for birth control pills prescribed by your doctor, as well as pregnancy tests, and fertility treatments.

(Don’t forget to download the guide on ‘Will My Distribution From My HSA Be Tax & Penalty-Free?‘ if you haven’t already).

HSA vs FSA Comparison

EligibilityMust be enrolled in a high-deductible health planAvailable with any health plan
OwnershipIndividual-owned accountEmployer-owned account
Contribution LimitsHigher contribution limitsLower contribution limits
Contribution SourceEmployee, employer, or bothEmployee only
Rollover of FundsFunds roll over from year to yearGenerally, limited to $550 carryover or grace period
Investment OptionsYes, can invest in mutual funds, stocks, etc.No investment options
PortabilityPortable; stays with you if you change jobsGenerally, tied to current employer
Tax TreatmentContributions are tax-deductibleContributions are pre-tax, withdrawals are tax-free
Use of FundsFor qualified medical expensesFor qualified medical, dental, and vision expenses
Withdrawal AgePenalty-free after age 65Subject to employer's plan rules
Use for Non-Medical ExpensesPenalty and taxes applyFunds may be forfeited if not used for eligible expenses

Are HSA and FSA-eligible expenses the same?

HSA and healthcare FSA-eligible expenses are the same, more or less. It will depend on the reimbursable expenses as indicated in your employer’s plan. Notice I mentioned healthcare FSA. There are actually 2 types of FSAs.

What are the 2 types of flexible spending accounts?

There are two types of FSAs: a Healthcare Flexible Spending Account and a Dependent Care Flexible Spending Account. You can use a healthcare FSA to pay for the various medical expenses that we talked about earlier. You can use a dependent care FSA to pay for childcare expenses, like babysitting, au pair, pre-K, before- and after-school programs, and some summer day camps. You can have both healthcare FSA and dependent care FSA.

How much money should I put in my FSA or HSA?

Healthcare FSA: First, calculate how much you’re likely to spend on medical expenses for this year. Then contribute that amount to your healthcare flexible spending account. Just make sure you’re not contributing more than the legal limit. Also, you don’t want to over contribute, because if you don’t use your FSA funds by the end of the year, you lose it. More on that later.

Dependent care FSA: Because childcare costs are really high, families typically contribute the max for a dependent care FSA. Again, you must use the full amount by the end of the year.

HSA: I personally use my HSA account as a retirement investment vehicle. Remember, you can invest your HSA funds in stocks or bonds if you choose the right provider. If you’re eligible for an HSA, and you have extra cash, it can be advantageous for you to just max out your HSA and invest the money and not even use it for medical expenses until you retire, so you can maximize its tax-free growth feature.

Can I change my flexible spending account amount?

Let’s say in the middle of the year, you have the urge to get massages every month, & you can get a prescription from your doctor. But you didn’t figure those costs in when you initially computed your FSA. You can’t just increase it in the middle of the year.

You can change your FSA amount outside of open enrollment only if you have a mid-year qualifying event, which includes: a change in marital status (marriage, divorce, legal separation, death of a spouse, annulment), change in a number of tax dependents (birth, adoption, death), or employment changes (quitting or starting a new job, change from full-time to part-time).

Where can you open a health savings account?

The beauty of an HSA is you can open one through any HSA provider of your choice. You don’t even have to choose the HSA that’s provided by your employer. Why would you not want to choose the HSA provided by your employer? Because there are much better HSA providers out there. Giving advice on the best HSA provider where you can have really low-cost investment options is one of the things we provide for our financial planning clients.

Is HSA use it or lose it? What happens if you don’t use FSA money?

That’s the beauty of an HSA is if you don’t use it, it does not disappear. It’s yours forever.

In contrast, you do lose your FSA money if you don’t use it by the end of the year. However, some employers allow a carryover of up to $500 of unused FSA money to the next year. If it’s December and you have $1,000 FSA money left, you can always stack up on contact lenses and pain relievers! Or maybe finally go get lasik!

As long as you spend the money on the medical expense by December 31st at 11:59pm, you can use leftover FSA money for it. You can submit for reimbursement out of the FSA account after the year is over, but the expense had to happen during the tax year.

Is it better to have an HSA or FSA?

I personally prefer an HSA, because it’s tax-deductible, and has tax-free growth and tax-free withdrawals. The “triple tax advantage.” No other retirement vehicle offers this feature.

If you’re not eligible for an HSA, there are many advantages to contributing to an FSA, because you’re going to spend the money anyway. You might as well do it in a way that results in a lower tax bill.

Can I have an HSA and an FSA in 2024?

In general, you cannot contribute to an HSA and an FSA in the same year. But, you can have an HSA and a dependent care FSA at the same time. Best of both worlds!


What is the difference between HSA and FSA? 

The biggest difference between FSA and HSA is that HSA contributions are yours for the rest of your life, while FSAs are less flexible and you forfeit any unused balance unless your employer allows a rollover. HSAs have higher contribution limits and you can change your contributions whenever. Many HSA plans allow contributions to be invested in stocks or bonds. . FSAs have lower contribution limits and the contributions can only be adjusted during open enrollment or with a change in employment or family status.

Common HSA vs FSA questions

Can you buy vitamins or other basic necessities with HSA or FSA?

Vitamins and nutritional supplements are not generally qualified HSA expenses unless they are used to treat specific medical conditions. For example, if you are pregnant, you can use your FSA to purchase prenatal vitamins. I take Vitamin D every day, it would have been nice if they were all covered! You also cannot use your HSA or FSA for general health expenses like dental floss, deodorants, lotion, shampoo, and spa salts.

Can I buy a treadmill with my HSA or FSA?  

Treadmills are not eligible HSA or FSA expenses. However, if you have a Letter of Medical Necessity from your doctor that requires you to exercise, you might be able to use HSA or FSA funds for a treadmill. Call your provider to check.

Can I use my HSA for a gym membership?

No, you generally cannot use your HSA funds for a gym membership. However, there may be exceptions if the gym membership is prescribed by a physician to treat a specific medical condition. It’s important to check with your tax advisor or HSA administrator for specific guidance related to your situation.

Can I buy a Peloton bike with my HSA?

No, purchasing a Peloton bike with your Health Savings Account (HSA) funds is generally not allowed.

Can I use my FSA or HSA at Massage Envy?

Yes, you can use your FSA or HSA money for massage therapy, provided you have a prescription from your doctor.

Will my HSA or FSA cover botox?

Whether your Health Savings Account (HSA) or Flexible Spending Account (FSA) will cover botox injections depends on the purpose of the treatment and whether it’s considered a qualified medical expense under IRS guidelines. It’s recommended to consult with your healthcare provider and benefits administrator to determine if botox injections are a qualified expense under your specific HSA or FSA plan.

What other expenses aren’t eligible?

Electric toothbrush, Apple Watch.

If you’d like to be sure you’re buying something that’s a qualified FSA expense, you can use an online FSA Store, such as www.fsastore.com to check. Definitely do a price check before you buy, as you may be able to get eligible products for cheaper at your local drugstore. The only downside is you’ll need a doctor’s prescription to get reimbursed from your HSA or FSA account if you buy them yourself.

Choose a HSA vs FSA in 2024

Start your HSA or FSA today to help pay for your medical costs. If you have questions or want to make sure you’re contributing the right amount and to the right account for your situation, schedule a free discovery call with one of our fee-only financial planners today!

Best Financial Planner Washington DC

Alvin Carlos, CFP®, CFA is an investment advisor and fee-only financial planner, in Washington, D.C that works with clients across the country. He has a Master’s degree in International Relations from SAIS-Johns Hopkins. Alvin is a partner of District Capital, a financial planning firm designed to help professionals in their 30s and 40s achieve their financial goals through smart investing, reducing taxes, retirement planning, and maximizing their money. Schedule a free discovery call to learn how we can help elevate your finances.


District Capital is an independent, fee-only financial planning firm. We help professionals and entrepreneurs in their 30s and 40s elevate their finances and maximize their money. We are based in Washington, D.C and we work with people virtually nationwide.

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