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PopularUpdated for 2025
What is an HSA/FSA?
Health Savings Accounts (HSA), Flexible Spending Accounts (FSA), and Health Reimbursement Arrangements (HRA) are tax-advantaged accounts that help you save money on healthcare expenses.
Quick Answer: These accounts allow you to set aside pre-tax or tax-deductible money for medical expenses, reducing your tax burden while saving for healthcare costs. Each account type has different rules, contribution limits, and eligibility requirements.
Account Types Explained
HSA - Health Savings Account
Tax-advantaged savings account for individuals with high-deductible health plans (HDHP).
Key Features
- •Triple tax advantage (tax-deductible contributions, tax-free growth, tax-free withdrawals for qualified expenses)
- •Funds roll over year to year - never expire
- •Portable - you own the account even if you change jobs
- •Can be invested for long-term growth
- •No "use it or lose it" rule
2025 Contribution Limits
Individual:$4,300
Family:$8,550
Catch-Up Contribution:$1,000 (age 55+)
Eligibility Requirements
- →Must be enrolled in a High-Deductible Health Plan (HDHP) - Minimum deductible: $1,650 (individual) or $3,300 (family) for 2025
- →HDHP out-of-pocket maximum cannot exceed $8,300 (individual) or $16,600 (family) for 2025
- →Cannot be enrolled in Medicare
- →Cannot be claimed as a dependent on someone else's tax return
FSA - Flexible Spending Account
Employer-sponsored account that allows you to set aside pre-tax dollars for eligible healthcare expenses.
Key Features
- •Pre-tax contributions reduce your taxable income
- •Can be used for medical, dental, and vision expenses
- •Funds available on day one of the plan year
- •Lower contribution limits than HSA
- •Employer may offer grace period or carryover option
2025 Contribution Limits
Individual:$3,300
Carryover:Up to $660 carryover to next year (if employer allows)
Eligibility Requirements
- →Must be offered by your employer
- →Funds typically expire at end of plan year (unless grace period or carryover applies)
- →Cannot contribute to both HSA and general-purpose FSA simultaneously
HRA - Health Reimbursement Arrangement
Employer-funded account that reimburses employees for qualified medical expenses.
Key Features
- •Funded entirely by employer (employees cannot contribute)
- •Tax-free reimbursements for qualified expenses
- •Rollover rules determined by employer
- •Can be paired with other health plans
- •Portable options available (ICHRA, QSEHRA)
2025 Contribution Limits
Limits set by employer - no federal maximum for most HRA types
Eligibility Requirements
- →Must be offered by your employer
- →Employer controls which expenses are eligible
- →May be forfeited if you leave your job (depends on plan)
Tax Advantages
All of these account types offer significant tax benefits, though the specifics vary by account type.
Lower Taxable Income
Contributions are made with pre-tax dollars, reducing your taxable income for the year.
Tax-Free Growth (HSA only)
HSA funds can be invested and grow tax-free, similar to an IRA.
Tax-Free Withdrawals
Money spent on qualified medical expenses is never taxed (for all account types).
Example Tax Savings: If you contribute $3,000 to an FSA or HSA and you're in the 22% federal tax bracket, you'll save approximately $660 in federal taxes alone (plus state taxes and FICA in some cases). That's money you keep in your pocket!
Quick Comparison
| Feature | HSA | FSA | HRA |
|---|---|---|---|
| Who Funds It | You | You | Employer |
| Funds Roll Over | Yes | Limited | Varies |
| Portable | Yes | No | Sometimes |
| Can Invest | Yes | No | No |
| Requires HDHP | Yes | No | No |
| 2025 Individual Limit | $4,300 | $3,300 | Varies |
What Can You Use These Accounts For?
Qualified Medical Expenses
All account types can be used for IRS-approved qualified medical expenses
Common eligible expenses include:
- ✓Doctor visits and co-pays
- ✓Prescription medications
- ✓Over-the-counter drugs (since 2020 CARES Act)
- ✓Dental care and orthodontia
- ✓Vision care and eyeglasses
- ✓Medical equipment (wheelchairs, crutches, etc.)
- ✓Menstrual care products (since 2020 CARES Act)
- ✓Mental health services
- ✓Chiropractic care
- ✓Medical transportation
Note: Some expenses may require a Letter of Medical Necessity (LMN) from your doctor. Examples include massage therapy, gym memberships, and certain supplements. Learn more about LMNs.
Official IRS Guidance
Source Documents
This information is based on official IRS publications
IRS Publication 969 (2025)
Health Savings Accounts and Other Tax-Favored Health Plans - The official guide to HSAs, FSAs, HRAs, and other health accounts.
IRS Publication 502 (2025)
Medical and Dental Expenses - Comprehensive list of qualified medical expenses that can be paid with these accounts.
IRS Guidance on FSAs and CARES Act Changes
Official IRS guidance on FSA regulations, including CARES Act changes for OTC medications and menstrual care products.
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Disclaimer: This information is for educational purposes only and should not be construed as tax or financial advice. Contribution limits and rules are subject to change. Always consult with your tax advisor or plan administrator for personalized guidance. Information is current as of 2025.