Understanding HSA FSA Funds: What are They and How Do They Work?

Health Savings Account (HSA) and Flexible Spending Account (FSA) funds are types of accounts that can help you save money for medical expenses.

HSAs and FSAs each have their own unique features, benefits, and rules to consider.

Here's a breakdown of HSA and FSA:

Health Savings Account (HSA):

• An HSA is a tax-advantaged savings account that is specifically for medical expenses.
• It is available to individuals who are enrolled in a high-deductible health plan (HDHP).
• Contributions to an HSA are tax-deductible, and the funds in the account can grow tax-free.
• HSA funds can be used to pay for qualified medical expenses, such as doctor visits, prescription medications, and certain medical supplies.
• Unused funds in an HSA roll over from year to year, so you can continue to save for future medical expenses.

Flexible Spending Account (FSA):

• An FSA is also a tax-advantaged account that can be used for medical expenses.
• Unlike an HSA, an FSA is typically offered through an employer-sponsored benefits plan.
• Contributions to an FSA are made through pre-tax payroll deductions, reducing your taxable income.
• FSA funds can be used for eligible medical expenses, such as co-pays, deductibles, and certain over-the-counter medications.
• One key difference with an FSA is that funds generally do not roll over at the end of the plan year, so it's important to plan carefully to use the funds within the designated time frame.

Both HSA and FSA funds can provide valuable savings opportunities for managing healthcare costs, but it's essential to understand the specific guidelines and benefits of each account type.

Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) are powerful tools for savvy savers looking to manage healthcare costs effectively while enjoying tax benefits.

Both HSAs and FSAs help you set aside money for medical expenses, but it's crucial to understand their differences.