Medical savings accounts offer a tax-free way to save money for qualified medical expenses while also lowering your taxable income, giving you a little bit of help from Tax Day. Although both types of medical savings account help you set aside money to offset your healthcare costs, there are a few key differences between the two to consider before choosing which one.
Health Savings Account (HSA) versus Flexible Spending Account (FSA)
Eligibility
HSA: You must enroll in a qualified High Deductible Health Plan (HDHP) to be eligible for an HSA.
Compared to FSA: To be eligible for an FSA, you must be an employee eligible for benefits through an employer that offers FSA benefits.
Maximum Annual Contribution
HSA: $3,550 for an individual and $7,100 for a family.[i]
Compared to FSA: $2,750 individual contribution.
What Happens to Unused Funds?
HSA: You keep unused funds regardless of plan enrollment or employment. It is a bank account with your name on it.
Compared to FSA: Some employers allow employees to roll over up to $500 of unused funds to your next plan year. If your employer does not allow this, all unused funds are forfeited.
How Can I Use This Money?
HSA: You can use HSA funds on qualified medical expenses. Additionally, after age 65, HSA funds can be used as a traditional retirement account.
Compared to FSA: You can use FSA funds on qualified medical expenses.
Does the Account Earn Interest?
HSA: Yes. An HSA account gains interest as long as you have the account.
Compared to FSA: No. FSA accounts do not earn interest and “resets” at the start of each benefit year.
How Do I Access the Money in My Account?
It’s common for both HSA and FSA accounts to provide debit cards to access the funds quickly.
Still have questions? GoHealth has the answers you need.
Sources
- Health Savings Account (HSA). Healthcare.gov.
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