Ahealth savings account or HSA and one flexible spending account Where FSA are two accounts that provide tax benefits to the individual when saving specifically for future medical expenses.
The Flexible Spending Account (FSA) is called flexible spending arrangement speak IRS. Both HSA and FSA offer health cost tax savings, but purchasing a medical plan that pays little up front is required to qualify for an HSA, which not everyone should do.
What is the difference between an HSA and an FSA
A HSA or one FSA allow a person to set aside money for health care costs that IRS takes into account medical expenses, such as prescription drugs, dental and vision care, over-the-counter drugs and other health-related items.
Many times the individual will receive a debit card for the account so they can pay for eligible expenses.
Both types of accounts have tax advantages, but also some notable differences between them.
Know this if you choose an HSA
A health savings account has a contribution limit, and their contributions are pre-tax or tax-deductible, in addition HSA the funds can be invested – and rolled over year after year.
A person must be eligible for a HSAand the money they use for eligible medical expenses is tax-exempt, with the option for the employer to contribute.
Know this if you choose an FSA
Like a health savings account, the flexible savings account limits the savings that can be made. Sometimes when an individual does not use the money at the end of the year, the money can be wasted as the money is pre-tax and available upfront.
Although employers can contribute to a FSAmost of them don’t.