HSA vs FSA: Which Account to Choose at Open Enrollment

If your health plan is HSA-eligible, a health savings account (HSA) is usually the more flexible choice, because you own the money and it does not expire at the end of the year. If your plan is not HSA-eligible, a health flexible spending account (FSA), if your employer offers one, is the pre-tax account you can fund, and electing only what you expect to spend limits the risk of forfeiting money.

Both accounts let you pay medical costs with money that has not been taxed. They differ on who can open one, how much you can put in, who owns the money, and what happens to whatever you do not spend. An FSA election is made before the plan year starts and generally cannot change until the next one, so open enrollment is when the choice counts.

Key takeaways

You can contribute to an HSA only while covered by an HSA-qualified high-deductible plan. A health FSA comes only through an employer, and self-employed people cannot have one.
2026 limits: HSA $4,400 self-only or $8,750 family, plus $1,000 at 55 or older; health FSA $3,400 per employee. The 2027 HSA limits are $4,500 and $9,000; the IRS had not published the 2027 FSA limit as of October 13, 2026.
An HSA balance carries forward with no limit and belongs to you. FSA money left at the end of the plan year is forfeited, apart from a carryover of up to $680 of unused 2026 money or a grace period of up to 2½ months, if your employer offers one.
Your full FSA election is available from the first day of the plan year. An HSA can only pay out what is already in it.
A general-purpose FSA blocks HSA contributions. A limited-purpose FSA for dental, vision and preventive care does not.

What each account is

An HSA is a savings account you own, paired with a high-deductible health plan (HDHP) that meets IRS rules. Since January 2026, every bronze and catastrophic plan available as individual coverage through a Marketplace also counts. You can open one through an employer or on your own with a bank or other trustee. The full eligibility rules are in HSA rules for 2026 and 2027.

A health FSA is an employer benefit. You choose an amount for the plan year, your employer takes it from your pay before tax, and the plan reimburses eligible medical costs. IRS Publication 969 describes health FSAs as employer-established plans and states that self-employed people are not eligible for them.

Both accounts pay for qualified medical expenses: the costs of medical care as the tax code defines them, such as deductibles, copays, prescriptions, dental and vision care. Over-the-counter medicines no longer need a prescription, and menstrual care products count. Neither account generally pays insurance premiums, although an HSA can in a few cases, such as COBRA or Medicare premiums after 65.

HSA and FSA side by side for 2026

Feature	HSA	Health FSA
Who can contribute	Anyone covered by an HSA-qualified plan, with no disqualifying other coverage, not on Medicare and not someone else's dependent	Employees whose employer offers one
2026 limit	$4,400 self-only, $8,750 family, plus $1,000 if 55 or older	$3,400 per employee
2027 limit	$4,500 self-only, $9,000 family, plus $1,000 if 55 or older	Not announced as of October 13, 2026
Who owns the account	You	It is an employer plan; the employer cannot pay out an unused balance to you
Unused money at year end	Rolls over with no limit	Forfeited, unless the plan offers a carryover (up to $680 from 2026) or a grace period of up to 2½ months
When the money is available	As it is deposited	The full annual election, from the start of the plan year
Investment growth	Interest and investment earnings are not taxed while in the account	None; it is a reimbursement plan, not an investment account
If you change jobs	The account goes with you	Ask your plan how a departure is handled
Changing the amount mid-year	You can add money on your own at any time up to the tax-filing deadline, within the limit	Only if the law and your plan allow it, such as after a change in family status

Pre-tax payroll contributions to either account avoid federal income tax and Social Security and Medicare tax. Publication 969 says FSA salary reductions are free of income and employment taxes, and Publication 15-B lists employer HSA contributions, which include pre-tax payroll contributions through a cafeteria plan, as exempt from both. If you put money into an HSA yourself, outside payroll, you deduct it on your federal return even if you do not itemize. That deduction lowers income tax only; the Social Security and Medicare tax already withheld from that pay is not refunded.

Use it or lose it: how FSA leftovers work

FSAs are use-it-or-lose-it accounts. Your employer cannot refund an unused balance. It can soften the rule in one of two ways, or neither, but not both:

Carryover: up to $680 of unused 2026 money moves into the next plan year. A plan may set a lower carryover.
Grace period: up to 2½ months after the plan year ends to incur new expenses with the old money. For a plan year that ends December 31, 2026, that means expenses incurred by March 15, 2027 at the latest.

Example: The amounts spent are illustrative; the limits are the IRS figures for 2026. An employee elects the 2026 maximum of $3,400 and has $2,500 of eligible costs by December 31, leaving $900. If the plan offers the full carryover, $680 moves into 2027 and $220 is forfeited. If the plan has a full 2½-month grace period instead, the whole $900 can still pay for costs incurred through March 15, 2027; anything left after that is lost. If the plan offers neither, all $900 is forfeited. The same $900 left in an HSA would stay in the account.

The flip side favors the FSA. Your whole election is available from the start of the coverage period, not just the amount taken from your pay so far. If you elect $3,400 and have a $3,000 procedure in February, the plan pays it even though only a few paychecks have gone in. An HSA can only pay what is already there.

Can you have both an HSA and an FSA?

Not a regular one. If you are covered by a general-purpose health FSA that pays medical bills before you meet your deductible, you cannot contribute to an HSA. Two kinds of FSA are compatible with an HSA:

A limited-purpose FSA pays only for dental, vision and preventive care, plus a few other permitted items. Paired with an HSA, it lets predictable costs like glasses or dental work come out of the FSA while the HSA keeps growing.
A post-deductible FSA pays nothing until the minimum HDHP deductible ($1,700 self-only or $3,400 family for 2026) has been met.

Watch for coverage through a spouse too. Publication 969 says a spouse's non-HDHP coverage does not affect your HSA only if it does not cover you, so check whether a spouse's general-purpose FSA can reimburse your expenses before you contribute to an HSA.

A dependent care FSA is a different account. It pays for child care or adult day care so you can work, not for medical costs. Its limit from 2026 is $7,500 per tax return ($3,750 if married filing separately), explained in dependent care FSAs in 2026.

Which account fits your situation

The plan usually decides the account, so compare plans first. Add the premiums to the costs you expect, as shown in how to compare plans by total yearly cost. Then use this table.

If this describes you	Account to look at	Why
Your plan is HSA-eligible and you can pay the deductible from savings	HSA, plus a limited-purpose FSA if offered	Unspent money keeps growing tax-free, and the FSA covers predictable dental and vision costs
Your plan is not HSA-eligible and you have predictable costs	Health FSA, sized to those costs	Without an HSA-eligible plan, it is the pre-tax medical account you can put your own pay into
Your plan is not HSA-eligible and you expect a large planned bill early in the year	Health FSA	The full election is available from day one
You are self-employed	HSA, with a bronze, catastrophic or other HSA-eligible plan	Self-employed people cannot have a health FSA
You may change jobs soon	HSA	The account goes with you
You will enroll in Medicare within the year	Check timing before choosing an HSA	HSA contributions must stop when Medicare starts, and premium-free Part A can be backdated up to 6 months

Sizing an FSA election

Start with costs you can predict: regular prescriptions, scheduled dental work, glasses or contact lenses, and copays for ongoing care. If your plan has no carryover or grace period, elect only what those predictable costs add up to. If it has a carryover, a cushion of up to the carryover amount is less risky.

Before your open enrollment deadline

Check whether each plan you are considering is HSA-eligible. HealthCare.gov's plan search has an HSA-eligible filter; for employer plans, check the plan documents or ask your benefits office.
Find out whether your employer's FSA has a carryover, a grace period or neither, and when claims for the year must be filed.
Count employer HSA contributions toward the limit. Anything your employer adds reduces what you can put in.
Treat the FSA amount you pick now as the amount for the whole year. A midyear change is possible only after an event your plan recognizes, such as a marriage, a birth or a new job for your spouse, and a plan is free to allow no midyear changes at all.

Frequently asked questions

Is the HSA or FSA limit higher for 2027?

The 2027 HSA limits are $4,500 for self-only coverage and $9,000 for family coverage. The IRS had not published the 2027 health FSA limit as of October 13, 2026; the 2026 limit is $3,400.

Can you switch from an FSA to an HSA in the middle of the year?

Usually not. You can start HSA contributions only once a general-purpose FSA no longer covers you, which is normally the end of its plan year, because FSA elections are generally fixed for the year. If the FSA has a grace period, Publication 969 lets you start HSA contributions during it only if your FSA balance at the end of the prior plan year was zero, so leftover money can delay your first HSA contribution.

Can you use an HSA or FSA to pay your health insurance premiums?

Not an FSA. An HSA can pay premiums only in limited cases: long-term care insurance, COBRA, coverage while you receive unemployment compensation, and Medicare once you are 65, but not Medigap.

What happens to your FSA if you do not spend it all?

Money left after any carryover or grace period your plan offers is forfeited, and your employer is not allowed to refund it to you.

Can a freelancer open an FSA?

No. Publication 969 states that self-employed people are not eligible for FSAs. A freelancer with an HSA-eligible plan, including a bronze plan bought as individual coverage through a Marketplace, can open an HSA if the other eligibility tests are met.