Is an FSA Like an HSA Bank Account? Understanding the Difference

If you're delving into the world of health savings, you might have encountered terms like FSA and HSA. While they are both tax-advantaged accounts designed to help with medical expenses, there are key differences between the two.

A Flexible Spending Account (FSA) and a Health Savings Account (HSA) serve similar purposes but have distinct features that set them apart.

One of the main differences is:

• Funds Rollover: FSAs usually have a 'use it or lose it' rule, meaning you have to spend the funds within the plan year or forfeit them. On the other hand, HSAs allow you to roll over any unused funds from year to year.

Here are some similarities and differences between an FSA and an HSA:

• Similarities:
• Both are funded with pre-tax dollars.
• Both can be used for qualified medical expenses.
• Differences:
• Eligibility requirements differ - FSAs are employer-sponsored, while HSAs are typically available to individuals with high-deductible health plans.
• Contribution limits vary - HSAs usually have higher contribution limits compared to FSAs.

When navigating the landscape of healthcare expenses, understanding accounts like the FSA and HSA can be invaluable. Both the Flexible Spending Account (FSA) and Health Savings Account (HSA) are designed to provide tax benefits while covering medical costs, yet they come with distinct differences that can impact your financial decisions.