Quick guide · 3 min read
HSA and FSA
A health savings account is the only account that is tax-deductible going in, tax-free while invested and tax-free coming out for medical costs. A flexible spending account is simpler but use-it-or-lose-it.
- Who it fits
- Anyone with a high-deductible health plan, or an employer FSA.
- Figures
- 2026 tax year
The key rule
For 2026, HSA contributions are up to $4,400 for self-only coverage and $8,750 for family coverage, plus $1,000 at age 55 or older. The health FSA limit is $3,400.
How it works
| HSA | Health FSA | |
|---|---|---|
| Who can have one | People on an HSA-eligible high-deductible plan | Employees whose employer offers one |
| 2026 limit | $4,400 self / $8,750 family | $3,400 |
| Unused money | Stays yours forever | Mostly lost, with a small carryover or grace period |
| Can be invested | Yes | No |
| After 65 | Withdrawals for any purpose taxed like an IRA | Not applicable |
4 steps
Confirm your plan is HSA-eligible
It must be a qualifying high-deductible health plan, and you cannot have other non-qualifying coverage.
Contribute through payroll
Payroll contributions also avoid Social Security and Medicare tax.
Invest the balance
Pay current medical bills from cash, keep the receipts and let the HSA grow. You can reimburse yourself years later.
Use your FSA by the deadline
Check your plan's grace period or carryover amount.
Example
The HSA as a retirement account
You and your family contribute $8,750 a year for 20 years, invest it and pay medical bills from cash while saving the receipts. At 7% growth the account could reach about $360,000. You can reimburse yourself tax-free for the saved receipts at any time.
Common mistakes
- California and New Jersey tax HSA contributions and earnings at the state level.
- Contributing to an HSA for months you were on Medicare or a non-qualifying plan.
- Having a general-purpose health FSA (yours or your spouse's) in the same year, which blocks HSA contributions.
Key dates
- April 15
- Deadline for prior-year HSA contributions outside payroll.
- Open enrollment
- FSA elections for next year.
Questions we hear
Can I have both an HSA and an FSA?
Only a limited-purpose FSA, covering dental and vision, alongside an HSA.
What if I change jobs?
The HSA is yours and moves with you. Watch the family limit if both you and your new employer contribute.
General education for TaxSquad clients, not advice for your situation. Rules and figures change. Talk to us before acting on this guide.