A Flexible Spending Account (FSA) is an employer-arranged account for out-of-pocket medical costs, while a Health Savings Account (HSA) is a savings account you can contribute to only if you have a high-deductible health plan.
Both let you pay medical expenses with untaxed money, which is why people lump them together. They're built differently: one comes through your job, the other is an account you own. This page explains the rules rather than telling you which to pick; for your own case, check with your plan administrator, the IRS or a tax professional.
Both can pay costs like a deductible or co-pay; HSA funds generally can't pay a premium.
What an FSA and an HSA are
HealthCare.gov describes a Flexible Spending Account as an arrangement through your employer that lets you pay for many out-of-pocket medical expenses with tax-free dollars. Allowed expenses include insurance copayments and deductibles, qualified prescription drugs, insulin and medical devices. You decide how much to put in, up to a limit set by your employer, and you aren't taxed on that money. The IRS adds that FSAs are employer-established plans, that you contribute by electing an amount to be withheld from your pay, that you designate the amount at the beginning of the plan year, and that self-employed people aren't eligible.
A Health Savings Account is a type of savings account that lets you set aside money on a pre-tax basis for qualified medical expenses. You may contribute only if you have an HSA-eligible plan, sometimes called a High Deductible Health Plan, which HealthCare.gov describes as generally a plan that only covers preventive services before the deductible. HSA funds generally may not be used to pay premiums. Earnings aren't taxable, and banks, credit unions and other financial institutions offer HSAs.
What it looks like
| Feature | FSA | HSA |
|---|---|---|
| Who sets it up | Your employer | You, through a bank, credit union or other institution |
| Who can contribute | You, by salary withholding; the employer may too | You or someone else; an employer may also contribute |
| Health plan required | Not stated by these sources | An HSA-eligible high-deductible plan |
| Limit | Up to a limit set by your employer | Set by the IRS: for 2026, $4,400 self-only or $8,750 family coverage, per Publication 969 |
| Leftover money | Employer may offer 2.5 more months or a limited carryover, not both | Stays in the account |
| If you change jobs | Tied to the employer plan | Portable; stays with you |
| Tax paperwork | Plan statements from your administrator | Form 5498-SA, Form 1099-SA, Form 8889 |
The IRS publishes the HSA limit each year and the amounts change, so read the current figure in IRS Publication 969 before you contribute.
On the paperwork: per Publication 969, a trustee sends Form 5498-SA showing what went into your HSA, and employer contributions also appear on your Form W-2 in box 12 with code W. Withdrawals are reported on Form 1099-SA, and you report HSA activity on Form 8889. Using a distribution for qualified medical expenses isn't taxed, but it's still reported; other uses can be taxed, so read the IRS publication first.
What to keep and for how long
The IRS is specific about HSAs. You must keep records sufficient to show three things: that distributions were exclusively to pay or reimburse qualified medical expenses, that those expenses hadn't already been paid or reimbursed from another source, and that they hadn't been taken as an itemized deduction in any year. Don't send these records with your return; keep them with your tax records. That page gives no number of years, so confirm how long to hold tax records for your case.
In practice, that means keeping:
- Itemized receipts and explanations of benefits (EOBs) for every expense you pay from an HSA or claim from an FSA. Our medical bills and EOBs page shows how to read one.
- Your FSA plan documents, including the leftover option your employer chose.
- The year-end tax forms: Form 5498-SA, Form 1099-SA and your W-2.
Paperlock can read the date and amount from a photographed receipt and find it when you ask, though a labeled folder works too. Organizing tax documents year-round and the tax season page cover the wider habit.