HSA vs FSA for 2027: Which One to Pick at Open Enrollment

Open enrollment for 2027 benefits is happening right now at most employers, and one box on the form is worth real money: how much to put into a health savings account (HSA) or a health flexible spending account (FSA). Both take money out of your paycheck before tax and pay for the same doctor visits, prescriptions and glasses. They behave completely differently after that — one keeps your money for life and can be invested, the other mostly expects you to spend it by the end of the plan year.

This guide puts the 2027 limits side by side, works out what each account saves at three incomes, and shows when the FSA's use-it-or-lose-it rule wipes out its tax benefit.

Who this is for: employees choosing benefits for 2027, and anyone with a high-deductible or bronze plan who can open an HSA on their own. What it does not cover: dependent care FSAs (a separate account for childcare, with its own household limit of $7,500 from 2026), health reimbursement arrangements (HRAs), which only an employer funds, and Medicare — once you enroll in Medicare you can no longer contribute to an HSA.

The numbers2027 limits at a glance

To contribute to an HSA in 2027, your health plan has to be a high-deductible health plan (HDHP) as the IRS defines it: a deductible of at least $1,750 for self-only coverage or $3,500 for family coverage, and an out-of-pocket maximum of no more than $8,700 or $17,400. Your plan documents or HR portal will say "HSA-eligible" or "HSA-qualified" when it does.

How they differTwo accounts, two different promises

A few rules decide which account you can actually have:

• You cannot contribute to an HSA while covered by a general-purpose FSA — including your spouse's. A limited-purpose FSA, which only pays dental and vision costs, is the exception and works alongside an HSA.
• The FSA belongs to the job. Leave your employer mid-year and the unspent balance is usually gone, unless you elect COBRA continuation. The HSA is an account in your name; it goes with you.
• Self-employed people cannot have a health FSA at all. They can have an HSA if their own plan qualifies — and from 2026, bronze and catastrophic plans bought on HealthCare.gov or a state Marketplace count as HSA-qualified even when they do not meet the usual deductible test (IRS Notice 2026-5). If you buy your own coverage, what ACA plans will cost in 2027 is worth reading alongside this.
• The FSA has a carryover or a grace period, never both. A carryover lets up to $680 of 2026 money roll into 2027; a grace period gives you until March 15 to spend last year's balance. Some plans offer neither. Your plan document says which.

What it savesThree households, worked out

Money that goes in through payroll skips federal income tax at your top rate, Social Security and Medicare tax (7.65% together) and, in most states, state income tax. The arithmetic is short:

Here is what a full contribution saves at three incomes, using the 2026 federal brackets (2027's are not published yet; the rates are the same, only the income thresholds move slightly) and a 5% state income tax as an example.

Two details change these numbers in real life:

• FICA is only saved through payroll. If you put money into an HSA yourself and deduct it on your tax return (Form 8889), you still save federal and state income tax, but not the 7.65%. On a $4,500 contribution that is $344 a year left on the table — use your employer's payroll deduction if there is one. Above the Social Security wage base ($184,500 in 2026) only the Medicare part, 1.45% (2.35% above $200,000 of wages), is saved.
• California and New Jersey tax HSA contributions. Those two states do not follow the federal rule, so residents save federal tax and FICA but not state tax, and owe state tax on the account's investment earnings. Health FSA contributions are untaxed in both.

To see the change on your own pay stub, enter the contribution as a pre-tax deduction in the paycheck calculator: a $4,500 HSA is about $173 out of each biweekly check, of which roughly $60 comes back to you as lower tax at $85,000.

The catchWhen an FSA costs more than it saves

The FSA's tax break is only worth having if you spend the money. Take the single $85,000 earner who elects the full $3,400. Every dollar contributed saves about 34.65 cents in tax, so the full election saves $1,178 — but every dollar left at year-end, beyond the $680 carryover, is simply gone.

Spend $1,500 of a $3,400 election and you have lost money compared with not using an FSA at all. The rule of thumb that follows: elect what you are confident you will spend — this year's prescriptions, planned dental work, glasses or contacts, therapy co-pays — not what you might spend if something goes wrong. Your current year's medical spending is the best guide; if you log it in an expenses tracker, the total is one filter away.

The long gameWhy an HSA is also a retirement account

An HSA has no deadline. You can pay a doctor's bill from it today, or pay it out of pocket, keep the receipt, and reimburse yourself from the account years later — there is no time limit on reimbursing a qualified expense incurred after the HSA was opened. Meanwhile the balance can be invested.

At the single $85,000 earner's tax rate, $4,500 a year invested at 5% for 20 years grows to about $148,800 in an HSA. The same pre-tax pay put into an ordinary brokerage account — taxed first at 34.65%, then 15% on the gains — ends at about $91,500. That gap is why people who can afford to pay small medical bills out of pocket treat the HSA as an extra retirement account, behind the employer match in a 401(k). If you are deciding where the next dollar of savings goes, how to maximize your 401(k) covers the order.

Who should pick whichA short decision guide

The emergency-fund point matters more than it looks: the average deductible on a Marketplace plan was $3,786 in 2026, and on an HDHP it can be up to $8,700 out of pocket for one person in 2027. How much emergency fund you need shows how to size the cash so a bad month does not turn into credit-card debt.

The other sideIf you run the benefits

Employers set the rules most employees never see:

• Employer HSA contributions count toward the employee's limit. If you put $1,000 into a worker's self-only HSA, they can add only $3,500 more in 2027. Contributions made through a cafeteria plan must be comparable across employees in the same category, or follow the cafeteria-plan rules.
• The FSA is front-loaded for the employee and back-loaded for you. Under the uniform-coverage rule, someone who elects $3,400, is reimbursed for all of it in February and leaves in March has received money they never contributed; the employer absorbs the difference. Forfeitures from other participants usually offset it, but a small team can lose money in a bad year.
• Choose carryover or grace period deliberately. A carryover keeps up to $680 of each participant's balance in the plan (and, if it is a general-purpose FSA, can make them ineligible for an HSA the next year); a grace period does neither but forces spending into the first ten weeks.

MethodologyWhere these numbers come from

• Limits: HSA contribution limits, HDHP deductibles and out-of-pocket maximums for 2027 from IRS Revenue Procedure 2026-24 (May 29, 2026); 2026 HSA figures from Rev. Proc. 2025-19; the 2026 health FSA limit ($3,400) and carryover ($680) from Rev. Proc. 2025-32. Bronze and catastrophic Marketplace plans as HSA-qualified: IRS Notice 2026-5.
• Tax model: wages as the only income, the 2026 standard deduction and federal brackets, 7.65% FICA below the 2026 Social Security wage base, 5% flat state tax as an illustration. Your real saving depends on your state (zero in states without income tax; less in California and New Jersey for an HSA) and on other income and deductions.
• Investment example: $4,500 at the end of each year for 20 years at a 5% annual return, compared with the same pre-tax pay invested in a taxable account after a 34.65% combined tax and a 15% tax on the gain at the end. It ignores dividends taxed along the way, which would widen the gap, and HSA fees, which narrow it.
• What will change: this guide will be updated when the IRS publishes the 2027 health FSA limit and carryover, and the 2027 federal brackets.

FAQFrequently asked questions

What is the HSA contribution limit for 2027?
$4,500 for self-only HDHP coverage and $9,000 for family coverage, set by IRS Revenue Procedure 2026-24. If you are 55 or older by the end of the year you can add $1,000. Employer contributions count toward the same limit.

What is the FSA limit for 2027?
As of October 9, 2026 the IRS has not published it. For plan years beginning in 2026 the health FSA limit is $3,400, with up to $680 carried over if the plan allows. The 2027 figure usually appears in October or November.

Can I have an HSA and an FSA at the same time?
Only if the FSA is limited-purpose (dental and vision) or post-deductible. A general-purpose health FSA — yours or your spouse's — makes you ineligible to contribute to an HSA for the months it covers you.

Can I open an HSA with a Marketplace plan?
Yes, if the plan is HSA-qualified. From January 1, 2026, bronze and catastrophic plans bought through HealthCare.gov or a state Marketplace count as HSA-compatible under the One Big Beautiful Bill Act, as confirmed in IRS Notice 2026-5.

What happens to my FSA money if I leave my job?
Usually you can submit claims for expenses incurred before your last day, and the rest is forfeited unless you elect COBRA continuation for the FSA. An HSA is yours and stays with you.

Is it better to put money in an HSA or a 401(k)?
Most people take the full 401(k) employer match first, because it is an immediate return. After that, an HSA you can invest is often the better next dollar: it is deductible going in, grows untaxed and comes out untaxed for medical costs.