FSA vs HSA: Key Differences, Rules, and How to Choose

How do you know if an FSA or HSA account is better for your pre-tax medical expenses? Both options offer great tax benefits for medical costs, but they are very different. You may only be eligible for one kind of account. If you’re eligible for both, you’ll see that there are many differences in the rules for each account. Once you’ve read this guide, you’ll know which type of account you’re most likely to be eligible for and how to choose the one that best fits your needs.

FSA vs. HSA: Which One Are You Eligible For?

Before you choose which type of pretax account you’d like to open, you need to know which of them you qualify for.

Here’s how to assess your eligibility for FSA:

• FSA accounts are only available through an employer-sponsored program. That means your place of employment needs to offer this benefit for you to be able to open an FSA account.
• You can be eligible for an FSA account even if you don’t get your health insurance through your employer’s plan. Most standard health plans can work together with an FSA account.
• Coverage for your FSA account ends when you leave your job, as it’s tied to your employer’s program.

For HSA, assess your eligibility according to the following:

• To be eligible for an HSA account, you need to be enrolled in an HSA-qualified High-Deductible Health Plan (HDHP.) 
• If you’re enrolled in any part of Medicare, you won’t qualify for an HSA account.

Can you have both an FSA and HSA account? Usually not. If you have a standard Health FSA account, you won’t be able to have an HSA account. But you can have specific types of limited FSA accounts along with an HSA account. 

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What Is a Flexible Spending Account (FSA)?

A Flexible Spending Account (FSA) is an employer-sponsored account that lets you pay for eligible medical, dental, and vision expenses using tax-free money. You can even use the money in this pretax account for eligible skincare expenses on skincareessentials.com. All the contributions to the account come from your paycheck before any taxes are taken off.

There’s a use-it-or-lose-it policy that applies to FSA accounts. That means that any funds you haven’t used by the end of the plan year will expire, unless your employer has a small grace period into the next year. You’ll also lose any unused funds if you leave the job before the plan year is over.

What Is a Health Savings Account (HSA)?

A Health Savings Account (HSA) works very differently from an FSA. First of all, it’s individual-owned, which means the account belongs to you, and you can take it with you from job to job. There’s also no use-it-or-lose-it condition. Any unspent funds can rollover indefinitely. Spend it whenever you want. 

The tax advantages on these accounts are also very different from FSA accounts. You can have both pretax funds added, and other tax-deductible contributions. All the growth on the investment account is tax-free, and withdrawals for eligible expenses are all tax-free as well.

How to Choose the Right Option for You

If you’re choosing between an FSA or HSA account during open enrollment, the choice will usually come down to which healthcare plan you’re signing up for. Signing up for a standard healthcare plan will make you eligible for an FSA account, while signing up for an HDHP plan will make you eligible for an HSA account. 

If you’re aiming for long-term healthcare savings, only an HSA will give that to you, so you can weigh that in when deciding between different kinds of healthcare plans.

What Can You Use FSA and HSA Funds For?

Both FSAs and HSAs cover a wide range of IRS-qualified medical expenses. You can cover all your typical medical and dental care like copays and deductibles, dental cleanings, and vision exams. Over-the-counter essentials like pain relievers and allergy medications are also eligible.

Many people don’t know this, but skincare and sun care items can be paid for with FSA/HSA funds as well. Sunscreen items, acne treatments, and medicated ointments are generally eligible to be paid for from these funds. Prescription skincare sometimes requires a Letter of Medical Necessity from a healthcare provider, also available through Flex on skincareessentials.com.

Shop our complete skincare collection and see which of your skincare products are eligible to be paid for with FSA/HSA funds.

Frequently Asked Questions

What happens to my FSA or HSA if I quit my job?

FSA: Because an FSA is owned by your employer, you generally forfeit any unspent funds when you leave your position. You can only submit claims for eligible expenses incurred before your last day of employment (unless you qualify for and elect COBRA coverage for your FSA).

HSA: You own your HSA completely. The account and all funds in it stay with you permanently regardless of job changes or retirement, allowing you to spend or invest those dollars tax-free on future qualified expenses.

Can I use my FSA/HSA card directly at online checkout on SkincareEssentials.com?

Yes. SkincareEssentials.com integrates directly with Flex (a payment processor for tax-advantaged healthcare spending). You can use your FSA/HSA debit card directly at checkout for eligible products.

Eligible products are clearly marked with an HSA/FSA badge on the site. If your cart contains both eligible and non-eligible items, Flex processes the qualified portion using your FSA/HSA card while allowing you to pay for the rest with a standard card.

What is the deadline to spend FSA funds each year?

Standard Rule: FSA funds must generally be spent by the end of your plan year (typically December 31st).

Employer Exceptions: Depending on your plan's terms, your employer may offer one of two optional relief periods:

1. Grace Period: Provides an additional 2.5 months (usually until March 15th) to spend remaining funds.
2. Carryover Option: Allows you to roll over a capped dollar amount (up to $680 for 2026) into the following plan year.

Check your specific employer plan details to confirm whether a grace period or carryover applies to your account.