Is HSA or FSA use it or lose it?

Is HSA or FSA use it or lose it? HSA and FSA: Use it or lose it! Learn how these healthcare accounts work and ensure you make the most of your funds before they expire. Dive into the details here.

Is HSA or FSA use it or lose it?

Is HSA or FSA use it or lose it?


HSAs are tax-advantaged savings accounts available to individuals who have a high-deductible health plan (HDHP). These accounts allow individuals to set aside pre-tax money to pay for qualified medical expenses. The funds contributed to an HSA belong to the account holder, and they can roll over from year to year, thus offering a long-term savings solution.

This means that if you don't use all of the money in your HSA during the year, it will remain in your account and continue to grow tax-free. There is no "use it or lose it" policy applied to HSAs. The funds you contribute will always be available for qualified medical expenses, regardless of the year they were contributed.


In contrast, FSAs are also tax-advantaged accounts that allow individuals to set aside pre-tax money for qualified medical expenses. However, unlike HSAs, FSAs operate under the "use it or lose it" policy.

This means that the funds contributed to an FSA must be used within a specific time frame, usually within the calendar year. If you don't use the money by the designated deadline, you will forfeit the remaining balance. The funds cannot be rolled over, and they do not belong to you after the designated period ends.

Advantages and Considerations:

HSAs have gained popularity due to their long-term savings capabilities and the fact that the funds are not subject to the "use it or lose it" policy. This allows individuals to accumulate savings over time, which can be especially beneficial for those who anticipate high medical expenses in the future.

On the other hand, FSAs offer some advantages as well. They often have higher contribution limits compared to HSAs, allowing individuals to set aside more money for medical expenses. Additionally, some employers may offer grace periods or allow limited carryovers for FSAs, providing a bit more flexibility in using the funds.

It's important to note that while many expenses are eligible for reimbursement through both HSAs and FSAs, there may be slight differences in the qualifying criteria for each account. It's always a good idea to review the specific guidelines provided by your employer or the account provider to ensure compliance.

HSAs do not have a "use it or lose it" policy, as the funds can roll over from year to year. FSAs, on the other hand, operate under a "use it or lose it" policy, and any unused funds are forfeited at the end of the designated period. Understanding the rules and advantages of each account can help individuals make informed decisions about which option is most suitable for their healthcare needs and financial goals.


Frequently Asked Questions

1. Is HSA or FSA "use it or lose it"?

HSA (Health Savings Account) is not "use it or lose it". The funds in your HSA roll over from year to year, and you can keep using them for eligible healthcare expenses as long as the account is open and you remain eligible for an HSA.

2. Is FSA (Flexible Spending Account) "use it or lose it"?

Yes, FSA (Flexible Spending Account) is typically "use it or lose it". This means that any funds left in your FSA at the end of the plan year or the grace period (if applicable) may be forfeited and cannot be rolled over to the next year.

3. Can I use my HSA funds for non-medical expenses?

No, HSA funds can only be used for qualified medical expenses. Using HSA funds for non-medical expenses may result in penalties and taxes, unless you are over 65 years old, in which case non-medical expenses are subject to income taxes but not penalties.

4. Is there a limit on how much I can contribute to an HSA or FSA?

Yes, there are contribution limits for both HSA and FSA accounts. The 2021 contribution limit for an HSA is $3,600 for individuals and $7,200 for families. The limit for an FSA is determined by your employer and may vary, but the maximum limit is currently $2,750 for 2021.

5. Can I use both an HSA and FSA at the same time?

Yes, you can have both an HSA and FSA, but there are certain restrictions. If you have a HSA, you can also have a limited purpose FSA that can be used for dental and vision expenses. However, if you have a regular FSA, you are not eligible to contribute to an HSA.