What Does HSA and FSA Mean? Everything You Need to Know

Health Savings Account (HSA) and Flexible Spending Account (FSA) are both tax-advantaged accounts that help you save money for medical expenses. Understanding the differences between the two can help you make smart decisions about your healthcare savings.

An HSA is a savings account that allows individuals to save money tax-free for qualified medical expenses. It is only available to individuals enrolled in a high-deductible health plan (HDHP). Contributions made to an HSA are tax-deductible, and funds in the account can be used for a wide range of medical expenses.

On the other hand, an FSA is a benefit offered by employers that allows employees to set aside pre-tax dollars for eligible medical expenses. Unlike an HSA, an FSA is not tied to a specific health plan, and funds must be used by the end of the plan year or they may be forfeited.

Here are some key differences between HSA and FSA:

• HSA funds roll over year to year, while FSA funds may have a
  

  Understanding HSA and FSA is crucial for anyone looking to effectively manage their healthcare expenses. An HSA, which stands for Health Savings Account, not only allows for tax-deductible contributions but also provides the unique advantage of letting your money grow tax-free over the years.