Understanding FSA and HSA Funds: A Helpful Guide

Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs) are two common types of accounts designed to help individuals save money for medical expenses.

FSAs and HSAs both offer tax advantages, but they have some key differences:

• FSAs are offered by employers, while HSAs are typically opened by individuals
• FSAs have a 'use-it-or-lose-it' rule, meaning funds don't roll over year to year, whereas HSA funds roll over and accumulate over time
• Contributions to an HSA are tax-deductible and withdrawals for qualified medical expenses are tax-free
• HSAs require a high-deductible health plan, while FSAs do not have this requirement

It's important to understand the differences between FSAs and HSAs to make the best decision for your healthcare savings needs.

Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs) are essential financial tools that empower individuals to set aside money for their healthcare needs.

While both FSAs and HSAs provide tax benefits, there are noteworthy distinctions between the two. One major difference is that FSAs can only be contributed to by an employer, whereas HSAs are accessible to individuals who meet specific criteria.

• HSAs offer the unique advantage of allowing funds to roll over from year to year indefinitely, while FSAs have a 'use-it-or-lose-it' provision that puts pressure on the account holder.
• With HSAs, not only are contributions tax-deductible, but withdrawals for eligible medical expenses remain tax-free, making them a fantastic option for long-term savings.
• To qualify for an HSA, an individual must have a high-deductible health plan (HDHP), which is not a requirement for FSAs.

By considering these differences, individuals can make informed choices about which account best meets their healthcare savings needs.