Does Your HSA Balance Roll Over Each Year? What About With an FSA?

Tax-advantaged accounts, such as health savings accounts (HSAs) and flexible spending accounts (FSAs), can help you save money on qualified medical expenses. The funds in these accounts are 100% tax-free when used to purchase eligible expenses like blood pressure monitors and prescription glasses. If you don’t use all the funds in your account by the end of the year, you may be eligible to roll over some or all of the money to the next year, depending on the type of account you have.

Does your HSA or FSA balance roll over to the next year?

With an HSA, the unused funds in your account automatically roll over to the next year. But this is not the case with an FSA. Generally, you forfeit unused FSA funds at the end of the year.

Your employer may offer a grace period or carryover option to give you extra time to use the funds in your FSA. A grace period, in most cases, gives you up to 2.5 months after the end of the year to use leftover FSA dollars. A carryover option gives you the ability to carry over a certain amount of FSA dollars to the following plan year. 

For 2025, you can carry over a maximum of $660 to the next plan year, if your employer allows it. So let’s say you contribute $2,000 to your FSA in 2025, and you only spend $1,200 by the end of the year. You may be able to carry over up to $660 into 2026, but you would have to forfeit the remaining $140.

Keep in mind that your employer cannot offer both a carryover option and a grace period. They can only offer one of these at a time. So it’s a good idea to talk to your employer’s human resources department to get a better idea of how your FSA works. 

HSAs and FSAs: Differences and similarities

HSAs and FSAs are both tax-advantaged accounts that allow you to pay for qualified medical expenses with pretax dollars. This lowers your taxable income and gives you tax-free withdrawals for eligible costs. Both can be used for prescription medications, certain dental and vision expenses, and other qualified medical expenses. 

A major difference between an HSA and FSA is who owns the account. An FSA is employer-sponsored, so you can only enroll in one if your employer offers it, and you will likely lose it if you change jobs. An HSA, however, is individually owned and portable. This means you can move your HSA from job to job or into retirement. HSAs also require enrollment in an HSA-eligible health plan, such as a qualified high-deductible health plan, while FSAs do not. 

Another major difference is how the money can be used over time. FSAs generally have a “use it or lose it” feature. This means you have to spend the funds in your account before the end of the plan year, or they’ll expire. Though, your employer may offer a grace period or carryover option to give you extra time to use the money. 

Funds in an HSA never expire. You can also invest the money in your account, so it has a chance to grow tax-free and can be used to pay for qualified medical expenses during retirement. 

What is FSAFEDS carry over?

FSAFEDS is the Federal Flexible Spending Account Program for federal employees. It allows you to carry over a limited amount of unused funds from certain accounts, such as your health care FSA (HCFSA) or limited expense healthcare FSA (LEX HCFSA), to the next benefit period. For 2025, you can carry over up to $660 to the next year if you have funds remaining at the end of the year, However, you must re-enroll in FSAFEDS for that following year to take advantage of the carry over. 

EXPERT PICKS: WHAT TO READ NEXT

• Make the most of your health savings account (HSA). Here are some HSA benefits that you can take advantage of this year. 

• Qualified medical expenses: You might be surprised to learn that you can use your HSA funds to pay for these qualified medical expenses tax-free.  

• Using your HSA funds during retirement: If you don’t use all the money in your HSA while you are working, you can use your funds to pay for common expenses during retirement.

How much can you contribute to an HSA or FSA?

Every year, the IRS sets annual contribution limits for HSAs and FSAs that have been adjusted for inflation. In 2026, you can contribute up to $4,400 to an individual HSA, up from $4,300 in 2025. You can contribute a maximum of $8,750 to a family account, up from $8,550 in 2025. The IRS also allows people 55 and older to make an additional $1,000 catch-up contribution to their HSA every year they qualify. 

So suppose you are 58 years old, and you enroll in an individual HSA account. For 2026, you can contribute up to $5,400, which includes the $1,000 catch-up contribution. 

The table below summarizes 2025 and 2026 HSA contribution limits.

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Source: IRS

There’s one annual contribution limit that applies to all FSA enrollees. For 2025, the IRS set the contribution limit at $3,300, up from $3,200 in 2024. But check with your employer for details, as they may not allow you to contribute as much as the IRS allows.

How much money can you roll over with an HSA?

You can roll over all the unused funds in your HSA at the end of the year. Unlike with an FSA, there is no limit to how much money you can roll over from year to year. Any unspent funds automatically roll over. 

Since your HSA balance carries forward, it has the potential to grow significantly over time. Similar to the money in an individual retirement account (IRA) or 401(k), you can invest your HSA funds in options such as mutual funds and exchange-traded funds (ETFs). The investment options available to you will depend on your HSA administrator.  

What are the rules for rolling over HSA funds?

One of the biggest advantages of an HSA is that your total unused balance rolls over from year to year. But to keep the tax benefits, you must follow IRS rules on how you spend the money.

HSA funds must be used for IRS-approved medical expenses. The IRS defines qualified medical expenses as costs related to the prevention or treatment of physical or mental illness. These are detailed in Publication 502, Medical and Dental Expenses. 

Common examples of qualified expenses include: 

• Acupuncture treatments

• Birth control

• Breast pumps

• Copays for prescription medications and office visits

• CT scans and MRIs

• Dental care

• Hearing aids

• Hospital visits

• Immunizations

• Pregnancy tests

• Psychotherapy

• Vision care

• X-rays

Here’s what happens if you use your HSA for nonqualified expenses: 

• The amount becomes taxable income. 

• You’ll face a 20% penalty if you’re under age 65. 

• If you’re 65 or older, the penalty doesn’t apply but the amount will be subject to taxes.

You should make sure to keep receipts for your expenditures when you use HSA funds. If you are audited by the IRS, you may have to provide evidence that you spent the money on qualified expenses.  

Can you transfer funds from one HSA to another?

If you want to change your HSA custodian, you can do an HSA account rollover. This involves closing your existing HSA and moving the unused funds to another account. 

When you initiate an HSA account rollover, the custodian of the account will either send you a check for the funds or an ACH transfer. You have 60 days to deposit this amount in a new HSA. If not, the distribution is taxable income and subject to a 20% penalty.  

You must notify your HSA custodian or employer and fill out paperwork to roll over your HSA. This is often done when someone:

• Leaves a job

• Has multiple accounts and wants to consolidate them

• Finds a plan with better features or lower costs

You can make one account rollover each year. The transfer of funds does not count toward the maximum contribution limit for your HSA.

Things to consider before rolling over your HSA account

Before transferring funds from one HSA provider to another, there are a few items you should consider. First, you will need to select the type of transfer you want to make. There are three options available: 

1. Cash transfer: In this scenario, your new HSA provider works with your current provider to move funds. (This is called a trustee-to-trustee transfer.) But if your HSA contains investments, they must be sold prior to the transfer, which could mean having to pay state taxes on the gains.

2. Account rollover: With an HSA account rollover, you’ll be actively involved in the process. You’ll have to withdraw the funds, including any money you receive from the sale of investments. Then, you’ll have 60 days to deposit the funds into the new HSA. If you don’t deposit the funds in time, they’ll be subject to income tax and a 20% penalty.   A limitation is that you can only do one HSA account rollover per 12-month period, as mentioned earlier. 

3. In-kind transfer: Your current HSA provider will transfer securities like stocks, bonds, or mutual funds to your new HSA provider. There will be no sale of the investments or taxes owed. You can do this multiple times a year. However, some HSA providers may not allow in-kind transfers.  

Here are some other things to consider before transferring your HSA:

• Fees: Some HSA providers may charge a transfer fee. There may also be monthly maintenance fees and charges for managing investments. Before making a transfer, you should ask about fees and other costs.   

• Investment options: It’s important to evaluate the types of investments available from a prospective HSA provider. Will they help you meet your goal of, say, focusing on high growth or a more conservative approach?

• Investment requirements: With some HSA providers, you may have to meet certain requirements, such as having a minimum balance in your account, before you are able to invest your money. Check to see if there are any investment rules you should be aware of. 

If you need help understanding the best options for your specific situation, you can reach out to a financial planner or tax advisor. 

Where do unused FSA funds go?

Unused money in your FSA will go to your employer once it expires. Your employer may use the funds for the administrative costs of sponsoring FSAs for employees. Or they may credit the funds to next year’s FSAs, depending on IRS rules.

Can you move funds from an HSA to an FSA?

The IRS does not allow for moving funds from an HSA to an FSA. You also cannot roll over HSA funds to a health reimbursement arrangement (HRA), 401(k), or IRA.

What happens to your HSA if you switch to an FSA?

If you enroll in an FSA, you can keep your HSA. And you are still allowed to spend the money in your HSA on eligible medical expenses. This is also the case if you own more than one HSA. 

However, you cannot make any new contributions to your HSA once you enroll in an FSA. (The IRS considers enrollment in an FSA as disqualifying medical coverage.) The exception is if your employer provides a limited-purpose FSA. In that case, you can contribute to both the FSA and your HSA. 

Limited-purpose FSAs can only be used to pay for the following qualified expenses:

• Dental care

• Vision care

• Preventative care items that your health plan does not cover  

However, after you meet your health insurance deductible, your employer may allow you to pay for other qualified medical expenses with your limited-purpose FSA.  

What happens to your HSA funds if you die?

Because you own your HSA, it can be transferred to one or more beneficiaries when you die. The beneficiaries can be people or entities like trusts. You can also change the beneficiaries at any time and specify their ownership percentages.  

If you name your spouse as the beneficiary of your HSA, they will own the account. They can then pay for qualified medical expenses with the funds tax-free. And they can contribute funds to the account if they have an HSA-eligible health plan. If you name someone other than your spouse as the beneficiary, the funds in the account will become taxable when you die.

The legal and tax issues involved in naming an HSA beneficiary can get complicated. So it’s best to seek out professional advice to avoid unexpected taxes or expenses.

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Written by:

Tom Taulli, EA

Tom Taulli, EA, founded and operates his own tax preparation and planning firm, Pathway Tax. He is a licensed enrolled agent and can represent taxpayers before the IRS. He can also prepare and advise on tax matters for all 50 states.

Edited by:

Charlene Rhinehart, CPA

Charlene Rhinehart, CPA, is a personal finance editor at GoodRx. She has been a certified public accountant for over a decade.

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