Can You Have Both an HSA and an FSA?

Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) are tax-advantaged tools designed to help individuals manage healthcare costs. Both accounts allow participants to set aside pre-tax money for qualified medical expenses, offering a financial benefit through reduced taxable income. A common question arises regarding whether it is possible to hold both an HSA and an FSA simultaneously. Understanding the specific rules and requirements governing each account is essential.

Understanding the Core Relationship Between HSAs and FSAs

A Health Savings Account (HSA) is a tax-advantaged savings account that pairs with a High Deductible Health Plan (HDHP). To be eligible for an HSA, an individual must be covered under an HDHP and generally cannot have any other health coverage that provides benefits before the HDHP deductible is met. For 2025, an HDHP must have a minimum annual deductible of $1,650 for self-only coverage or $3,300 for family coverage. Annual out-of-pocket expenses, including deductibles and co-payments, cannot exceed $8,300 for self-only coverage or $16,600 for family coverage.

A general-purpose Flexible Spending Account (FSA) allows individuals to use pre-tax dollars for a broad range of qualified medical, dental, and vision expenses. These expenses typically include co-pays, deductibles, and prescriptions. The fundamental conflict arises because a general-purpose FSA provides what the IRS considers “other health coverage” that pays for medical expenses before an HDHP deductible is satisfied. This “first-dollar” coverage directly disqualifies an individual from contributing to an HSA.

IRS regulations prohibit individuals from contributing to an HSA if they are covered by any non-qualifying health plan, which includes a general-purpose health FSA. An individual covered by a general-purpose FSA is ineligible for an HSA for the entire period of FSA coverage.

Identifying Compatible Flexible Spending Accounts

While a general-purpose FSA typically disqualifies an individual from HSA eligibility, specific types of FSAs are compatible. A Limited-Purpose Flexible Spending Account (LPFSA) restricts reimbursements to dental and vision expenses. Since these expenses generally do not count towards an HDHP medical deductible, an LPFSA can be held concurrently with an HSA without affecting HSA eligibility. This arrangement allows individuals to use pre-tax funds for predictable dental and vision costs while preserving HSA funds for broader medical needs or long-term savings.

Another compatible option is a Post-Deductible FSA. This FSA functions initially like an LPFSA, reimbursing only dental and vision expenses. Once the individual’s HDHP deductible has been met, the Post-Deductible FSA expands to cover a wider range of general medical expenses. This design ensures the FSA does not provide “first-dollar” coverage for general medical expenses, maintaining HSA eligibility until the HDHP deductible is satisfied.

A Dependent Care Flexible Spending Account (DCFSA) is separate from health-related FSAs and is fully compatible with an HSA. DCFSAs are for eligible dependent care expenses, such as childcare for dependents under age 13 or care for a disabled spouse or elderly parent, allowing the account holder and spouse to work or attend school. Since DCFSAs do not cover medical expenses, they do not impact HSA eligibility.

Grace periods and carryover provisions from a general-purpose FSA can influence HSA eligibility in a subsequent plan year. If a general-purpose FSA has a grace period, an individual with remaining funds is considered to have disqualifying coverage during that period. This can delay HSA contributions until the grace period concludes. Similarly, if an employer’s plan allows for a carryover of unused general-purpose FSA funds into the next year, the individual may be ineligible for HSA contributions for the entire subsequent plan year. Employers may offer options to mitigate this, such as converting the general-purpose FSA to a limited-purpose FSA for the grace period or allowing employees to decline the carryover.

Navigating Contributions and Reimbursements

When an individual holds both an HSA and a compatible FSA, such as a Limited-Purpose FSA, understanding the separate rules governing contributions and reimbursements is important. HSA contribution limits are set annually by the IRS and are independent of any FSA contributions. For 2025, the maximum HSA contribution is $4,300 for self-only coverage and $8,550 for family coverage. Individuals aged 55 and older can contribute an additional $1,000 catch-up contribution.

FSA contribution limits are also determined by the IRS each year. For 2025, the maximum employee contribution to a healthcare FSA, including Limited-Purpose FSAs, is $3,300. If both spouses are offered FSAs by their employers, each can contribute up to this limit to their respective accounts. These limits apply to the specific account type and do not affect the separate HSA limits.

A Limited-Purpose FSA provides “first-dollar” coverage for dental and vision expenses. Funds from the LPFSA can be used for these specific costs immediately, without needing to meet an HDHP deductible first. This approach allows HSA funds, which roll over year-to-year and can be invested, to be preserved for future medical expenses or retirement.

It is crucial to coordinate reimbursements to prevent “double-dipping,” which involves using both accounts for the same expense. IRS rules prohibit seeking reimbursement from both an FSA and an HSA for the same qualified medical expense. Account holders must ensure that any expense reimbursed by one account is not subsequently submitted for reimbursement from the other. This coordination is essential for compliance and to avoid potential tax penalties.

Key Considerations for Account Holders

Account holders should carefully manage their healthcare accounts to avoid unintended tax implications. If an individual inadvertently contributes to an HSA while covered by a general-purpose FSA, or vice versa, it can lead to issues with HSA eligibility. Such situations may require corrective actions, which can involve withdrawing excess HSA contributions or ceasing FSA participation, to avoid penalties or income inclusion.

Strategically utilizing compatible accounts can maximize tax savings and optimize healthcare spending. For instance, using a Limited-Purpose FSA for routine dental and vision expenses allows individuals to preserve their HSA funds. This strategy can be particularly beneficial for those who prefer to let their HSA balance grow through investments, leveraging its triple tax advantage (tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses).

The availability and type of FSAs offered are determined by employer benefit plans. Individuals should consult their employer’s benefits administrator to understand the specific FSA options available to them, including whether Limited-Purpose or Post-Deductible FSAs are offered. This information is vital for making informed decisions during open enrollment periods and for effectively planning healthcare finances.