Can You Have an HSA and Dependent Care FSA at the Same Time?
Optimize your financial strategy by understanding how to effectively combine distinct tax-advantaged accounts for healthcare and dependent care needs.
Health Savings Accounts (HSAs) and Dependent Care Flexible Spending Accounts (FSAs) are distinct financial tools designed to help individuals manage specific types of expenses. An HSA serves as a savings and spending account for healthcare costs, allowing funds to accumulate and be used for qualified medical expenses. A Dependent Care FSA, conversely, covers eligible expenses related to the care of dependents, such as children or incapacitated adults, enabling the account holder to work or seek employment.
Understanding Health Savings Accounts
A Health Savings Account (HSA) is a tax-advantaged savings vehicle for individuals with a high-deductible health plan (HDHP) to pay qualified medical expenses. To be eligible for an HSA, an individual must be enrolled in an HDHP and generally not have other health coverage, be enrolled in Medicare, or be claimed as a dependent. The HDHP must meet specific annual deductible and out-of-pocket maximum thresholds, which are adjusted yearly. For 2025, minimum deductibles are $1,650 for self-only coverage and $3,300 for family coverage. Out-of-pocket maximums are $8,300 for self-only coverage and $16,600 for family coverage.
Contributions to an HSA can be made by the individual, an employer, or both, and are limited annually. For 2025, the contribution limit is $4,300 for self-only HDHP coverage and $8,550 for family HDHP coverage. Individuals aged 55 and older can contribute an additional $1,000 per year. These contributions are tax-deductible, or pre-tax if made through payroll deductions, reducing taxable income.
Funds within an HSA grow tax-free, and withdrawals are also tax-free when used for qualified medical expenses. Common expenses include deductibles, copayments, coinsurance, prescription drugs, dental care, and vision care. The account funds remain with the individual, even with job or insurance plan changes, and there is no “use-it-or-lose-it” rule, allowing unused funds to roll over year to year. This triple tax advantage—tax-deductible contributions, tax-free growth, and tax-free withdrawals—makes HSAs a valuable tool for healthcare savings.
Understanding Dependent Care Flexible Spending Accounts
A Dependent Care Flexible Spending Account (FSA) allows individuals to set aside pre-tax money from their paycheck for eligible dependent care services. This account covers costs that enable the account holder to work or actively look for work. Eligible dependents typically include a qualifying child under 13 or a disabled spouse or other dependent incapable of self-care who lives in the account holder’s home. The care must be necessary for the account holder to be gainfully employed or to seek employment.
Annual contribution limits for Dependent Care FSAs are set. For 2025, the maximum is $5,000 per household for single individuals or married couples filing jointly. If married individuals file separate tax returns, the limit is $2,500 per person. These pre-tax contributions reduce taxable income.
Qualified dependent care expenses include services such as daycare, preschool, before and after-school programs, and summer day camps. Nanny or babysitting services can also qualify if for work-related care. Educational expenses, like kindergarten tuition, are generally not eligible unless part of a broader childcare program. Unlike HSAs, Dependent Care FSAs are typically subject to a “use-it-or-lose-it” rule, meaning funds must be used within the plan year or forfeited. Some plans may offer a grace period to incur expenses after the plan year ends.
Coordinating Both Accounts
An individual can have both a Health Savings Account (HSA) and a Dependent Care Flexible Spending Account (FSA) simultaneously. This is permissible because a Dependent Care FSA is not considered “other health coverage” that would disqualify an individual from HSA eligibility. Rules allow for the coexistence of these two distinct tax-advantaged accounts, as they serve different financial purposes.
Despite holding both, it is important to understand that funds from each account are intended for separate categories of expenses. HSA funds are specifically for qualified medical expenses, encompassing a wide range of healthcare costs. Conversely, Dependent Care FSA funds are designated solely for eligible dependent care expenses, which are costs incurred for the care of a qualifying individual that enable the account holder to work.
A key rule prohibits “double-dipping,” meaning the same expense cannot be reimbursed by both accounts. For example, if a child receives medical attention at daycare, the medical portion must be paid from the HSA, and the dependent care service cost from the Dependent Care FSA. This ensures no single dollar amount is reimbursed twice from tax-advantaged accounts. Account holders must maintain clear records for each expense type, separating medical from dependent care costs, to ensure compliance. Proper record-keeping helps avoid potential issues and ensures withdrawals are properly substantiated.