The difference between HSAs and FSAs (plus 9 ways to use them)

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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.

Read more: How HSAs work

What’s the difference between an HSA and an FSA?

There are pros and cons to HSAs and FSAs. Here’s a look at the differences between the two options.

Health savings account (HSA) Flexible spending account (FSA)
Eligibility requirements
  • Eligibility requirements include having a high-deductible health plan (HDHP)
  • No eligibility requirements
Contribution limit
  • 2017 contributions capped at $3,400 for individuals or $6,750 for families
  • 2016 contributions capped at $2,550
Changing contribution amount
  • You can change how much you contribute to the account at any point during the year.
  • Contribution amounts can be adjusted only at open enrollment or with a change in employment or family status.
  • Unused balances roll over into the next year.
  • With a few exceptions, FSAs are “use it or lose it,” and you forfeit any unused balance.
Connection to employer
  • Your HSA can follow you as you change employment.
  • In most cases, you’ll lose your FSA with a job change. One exception: if you’re eligible for FSA continuation through COBRA.
Effect on taxes
  • Contributions are tax-deductible, but can also be taken out of your pay pretax. Growth and distributions are tax-free.
  • Contributions are pretax, and distributions are untaxed.

Here’s a look at some HSA changes coming for 2017. Below is a chart from the Society of Human Resource Management:

The difference between HSAs and FSAs (plus 9 ways to use them)

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:

  1. Prescription eyeglasses, contact lenses
  2. Acupuncture
  3. Chiropractic services
  4. Laser eye surgery; LASIK
  5. Hearing Aids (including batteries and repair)
  6. Insurance premiums not paid by your employer
  7. Drugs, medications
  8. Pregnancy test kits
  9. Smoking cessation programs

For a full list of approved HSA or FSA expenses, check out this list from the IRS.

Read more: How to decide if an HSA is right for you

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