HSA, FSA, and LSA: What's the Difference (and What Can You Actually Buy)?

Every November, the same three letters show up on your benefits portal during open enrollment: HSA. FSA. LSA.

And every November, most people click past them as fast as possible — which is exactly how you end up paying out of pocket for Claritin, your kid’s allergy testing, and a $250 air purifier that your FSA would have covered without a second thought.

30-second summary: HSA vs FSA vs LSA

HSA (Health Savings Account)

• Tied to a qualifying high-deductible health plan (HDHP).
• 2026 HDHP minimum deductibles: $1,700 self-only / $3,400 family (IRS Rev. Proc. 2025-19).
• 2027 HDHP minimum deductibles: $1,750 self-only / $3,500 family, with out-of-pocket maximums of $8,700 self-only / $17,400 family (IRS Rev. Proc. 2026-24).
• 2026 contribution limits: $4,400 self-only / $8,750 family, plus $1,000 catch-up at 55+.
• 2027 contribution limits: $4,500 self-only / $9,000 family, catch-up stays $1,000 — confirmed by the IRS in May 2026.
• Covers IRS-qualified medical expenses (see IRS Pub. 969).
• Triple tax advantage: pre-tax contributions, tax-free growth, tax-free qualified withdrawals.
• Rolls over forever, portable if you leave your job, and can be invested.
• Power move: pay expenses out of pocket now, let the HSA grow for decades, reimburse yourself later with saved receipts.

FSA (Flexible Spending Account)

• Available if your employer offers it; no HDHP requirement.
• 2026 contribution limit: $3,400.
• 2027 contribution limit: not yet announced by the IRS. Expect the Revenue Procedure this October or November — we'll update this the moment it's official.
• Covers most of the same medical expenses as an HSA.
• Use-it-or-lose-it: leftover funds are generally forfeited at year-end.
• Some plans allow either (not both):
  • Carryover up to $680, or
  • 2.5-month grace period (to March 15).
• Full annual election is available on day one of the plan year.
• Separate Dependent Care FSA for childcare: 2026 limit $7,500 for couples filing jointly (per the One Big Beautiful Bill).
• 2027: stays at $7,500 (or $3,750 married filing separately) — a fixed dollar cap under 2025's tax law, not adjusted for inflation, so it carries forward without a fresh IRS announcement.

LSA (Lifestyle Spending Account)

• Funded entirely by your employer; you don’t elect contributions.
• Taxable to you: employer contributions show up on your W-2 like wages.
• Still effectively free money: a $1,000 LSA typically nets ~$650–$750 after tax.
• Eligible uses are employer-defined (no IRS list): often fitness, mental health, ergonomic/home office gear, family care, financial wellness, sometimes pet care.
• Usually does not roll over—use it within the plan year.

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Caeli Spectrum

• Everyday medical (sunscreen, OTC pain meds, period products, bandages, thermometers)
  • HSA: yes
  • FSA: yes
  • LSA: usually no
• Glasses, contacts, dental work, prescription copays
  • HSA: yes
  • FSA: yes
  • LSA: usually no
• Smart rings, high-end massage guns, light therapy devices
  • HSA: yes, often with a Letter of Medical Necessity (LMN)
  • FSA: yes, often with LMN
  • LSA: depends on employer
• Air purifiers, hypoallergenic bedding, some supplements
  • HSA: yes with LMN
  • FSA: yes with LMN
  • LSA: possibly, plan-dependent
• Gym memberships, yoga, meditation apps
  • HSA: no (rare exceptions)
  • FSA: no
  • LSA: commonly yes
• Home office / ergonomic gear (chairs, standing desks)
  • HSA: no
  • FSA: no
  • LSA: commonly yes
• Childcare, summer camp
  • Dependent Care FSA: yes (separate from healthcare FSA)
  • LSA: sometimes, depending on plan
• Pet care, financial coaching, therapy
  • HSA: no (therapy is yes only when medically necessary and billed as healthcare, not as an LSA-style perk)
  • FSA: no for pet care/financial coaching; yes for qualified mental health treatment as medical care
  • LSA: often yes for all three, if employer allows

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Best spending order if you have all three

1. LSA first
   • Taxable, often no rollover, and limited eligible list.
   • Use it on things HSAs/FSAs don’t cover (gym, wellness apps, ergonomic gear, pet care, certain coaching).
2. FSA next
   • Use-it-or-lose-it risk.
   • Spend down on predictable medical expenses during the year.
3. HSA last
   • Rolls over forever, can be invested, and is triple-tax-advantaged.
   • If you can afford it, pay current medical costs out of pocket and let the HSA grow.

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Common confusion points

• HSA + regular healthcare FSA?
  • Generally no; that’s considered double-dipping.
  • Exception: a Limited Purpose FSA (dental/vision only) can pair with an HSA and is often optimal.
• HSA + Dependent Care FSA?
  • Yes. One is for medical, the other for childcare.
• Do funds roll over?
  • HSA: yes, indefinitely.
  • FSA: maybe up to $680 or a 2.5‑month grace period, depending on plan.
  • LSA: usually no.
• Why is LSA taxable but HSA isn’t?
  • HSA: funded with pre-tax payroll dollars; never counted as income.
  • LSA: employer adds money on top of your pay; IRS treats it as wages.
• Can you invest FSA or LSA balances?
  • No. Only HSAs can be invested.
• If you leave your job:
  • HSA: yours to keep.
  • FSA: leftover funds usually forfeited (with limited COBRA options).
  • LSA: forfeited.

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