DECEMBER/JANUARY 2016 – Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) are increasingly popular due to the changes in healthcare over the last several years.
Both accounts allow participants to use tax-free dollars to spend on healthcare need, but there are some differences between an HSA and an FSA. Most notably, HSA funds roll over and accumulate year after year if they are not spent, and they are owned by the individual. (Another choice, Health Reimbursement Arrangements, are owned by employers.)
HSAs are really awesome for some people – you can use them to pay for qualified medical expenses at any time without paying taxes or penalties! However, if you see a doctor frequently, HSAs are probably not the best choice for you — since high-deductible health plans are typically required to be eligible for an HSA.
What’s the difference between an HSA and an FSA?
There are pros and cons to HSAs and FSAs. Below is a very helpful chart from Nerdwallet:
|Health savings account (HSA)||Flexible spending account (FSA)|
|Changing contribution amount||
|Connection to employer||
|Effect on taxes||
There are some great ways you can use your HSA or FSA that you may not know about. Below are some ideas!
9 ways to use your HSA or FSA you may not know about:
- Prescription eyeglasses, contact lenses
- Chiropractic services
- Laser eye surgery; LASIK
- Hearing Aids (including batteries and repair)
- Insurance premiums not paid by your employer
- Drugs, medications
- Pregnancy test kits
- Smoking cessation programs
For a full list of approved HSA or FSA expenses, check out this list from the IRS.