What If You Use Both FSA and HSA? Understanding How They Work Together

If you're someone who is using both an FSA (Flexible Spending Account) and an HSA (Health Savings Account), you might find yourself juggling both accounts to maximize your healthcare savings. While both accounts offer tax advantages, they have different rules and contribution limits that you need to be aware of.

Here's what you need to know if you are using both FSA and HSA:

• Understanding FSA: FSA is a pre-tax account that allows you to contribute funds to pay for eligible medical expenses. However, the funds in the FSA must be used by the end of the plan year, or you risk forfeiting the money.
• Understanding HSA: HSA is also a tax-advantaged account, but it differs from an FSA in that the funds roll over year after year. You can only contribute to an HSA if you have a high-deductible health plan.
• Rules for Using Both: If you have both an FSA and HSA, you can use the funds in the FSA for eligible medical expenses not covered by your HDHP until you meet your deductible. After that, you can use the HSA funds.
• Coordination of Benefits: It's important to keep track of your expenses and which account you are using for what purpose to ensure you are compliant with IRS regulations.

By understanding how FSA and HSA work together, you can take advantage of both accounts to save on healthcare costs while maximizing your tax savings. Consult with a financial advisor or healthcare benefits expert to help you navigate the complexities of using both FSA and HSA effectively.

Using both an FSA and HSA can be a savvy financial move, allowing you to stretch your healthcare budget further by utilizing the benefits each account offers.