By Qamar S, 15 years in US medical billing · Last reviewed September 24, 2026
An HSA is a savings account you own for life, but you can only open one if you have a high-deductible health plan (HDHP). An FSA is offered through your employer, works with most plans, but money you don’t spend by the deadline is usually lost. For 2027 you can put up to $4,500 (self-only) or $9,000 (family) into an HSA. The 2026 FSA limit is $3,400; the IRS usually announces the next year’s FSA limit in the fall.
2027 numbers at a glance: HSA limit $4,500 self / $9,000 family (+$1,000 if 55 or older) · HDHP minimum deductible $1,750 self / $3,500 family · HDHP out-of-pocket max $8,700 self / $17,400 family · FSA limit $3,400 for 2026 plan years ($680 can carry over into 2027 if your plan allows).
HSA vs FSA: side by side
| Feature | HSA (Health Savings Account) | FSA (Flexible Spending Account) |
|---|---|---|
| Who can open one | Only people covered by an HSA-eligible plan (an HDHP, or since 2026 a bronze or catastrophic marketplace plan) | Employees whose employer offers one |
| 2027 limit | $4,500 self-only / $9,000 family | 2027 limit not yet announced ($3,400 for 2026) |
| Who owns the money | You. It stays yours if you change jobs | Your employer’s plan. Usually lost if you leave |
| Unused money | Rolls over every year, forever | Use it or lose it (some plans allow a small carryover or grace period) |
| Can you invest it | Yes, once your balance is high enough (depends on provider) | No |
| Tax benefits | Tax-free in, tax-free growth, tax-free out for medical costs | Tax-free in and out for medical costs |
| Can you change contributions | Any time | Usually only at open enrollment or after a life event |
How an HSA works
You (and your employer, if it contributes) put money in before tax. It can grow tax-free, and withdrawals for qualified medical expenses are tax-free too. The money never expires and moves with you if you change jobs or plans.
To contribute, you must:
- be covered by an HSA-eligible health plan
- have no other disqualifying health coverage (for example, a general-purpose FSA)
- not be enrolled in Medicare
- not be claimed as a dependent on someone else’s tax return
New since 2026: bronze and catastrophic plans bought through the marketplace count as HSA-compatible, and people in certain direct primary care arrangements can still contribute. See the IRS announcement.
If you take HSA money out for non-medical expenses before age 65, you pay income tax plus a 20% penalty. After 65, non-medical withdrawals are taxed like normal income but have no penalty.
How an FSA works
Your employer sets up the FSA, and you choose how much to put in for the year from your paycheck, before tax. The full yearly amount is usually available on day one. The catch: money you don’t spend by the plan’s deadline is generally forfeited. Your employer can choose to allow either a short grace period (up to 2½ months) or a limited carryover ($680 from a 2026 plan year into 2027), but not both.
A limited-purpose FSA covers only dental and vision costs. It can be combined with an HSA, which makes it useful for people who want both.
Which is better for you?
An HSA is usually better if:
- you are healthy and don’t expect big medical bills
- you can afford a higher deductible if something happens
- you want to save for future medical costs, including in retirement
An FSA is usually better if:
- your plan is not HSA-eligible (most HMOs and PPOs with low deductibles)
- you have predictable costs, like prescriptions, braces or regular therapy
- you want the full yearly amount available right away
From the billing side: keep every itemized receipt and Explanation of Benefits (EOB) for anything you pay with an HSA or FSA card. Administrators can ask you to prove an expense was medical, and “I lost the receipt” can turn a tax-free purchase into a taxable one. A simple folder per year saves a lot of stress.
What can you pay for?
Both accounts cover qualified medical expenses such as deductibles, copays, coinsurance, prescriptions, dental and vision care, and many over-the-counter medicines and supplies. The IRS keeps the official list in Publication 502.
Frequently asked questions
Can I have both an HSA and an FSA?
Not a regular FSA. You can pair an HSA with a limited-purpose FSA (dental and vision only).
What happens to my HSA if I change jobs?
Nothing. The account belongs to you, and the money stays yours.
What is the HSA limit for 2027?
$4,500 for self-only coverage and $9,000 for family coverage, plus a $1,000 catch-up if you are 55 or older. Source: IRS Revenue Procedure 2026-24.
What is the FSA limit for 2027?
The IRS has not announced it yet. The limit for 2026 plan years is $3,400, and it usually rises slightly each year. We will update this page when the 2027 figure is released.
Sources
- IRS Revenue Procedure 2026-24 (2027 HSA and HDHP limits)
- IRS: HSA guidance under the One, Big, Beautiful Bill
- IRS Publication 969: HSAs and other tax-favored health plans
- IRS Publication 502: Medical and dental expenses
- Newfront: 2026 health FSA limit increases to $3,400 (Rev. Proc. 2025-32)
*Choosing a plan for 2027? See Open Enrollment 2027 and PPO vs HMO. This article is educational and is not tax advice. See our Disclaimer.*