
How is an HSA different from an FSA?
Understanding two popular ways to get a tax break on medical expenses
At first glance, health savings accounts (HSAs) and flexible spending accounts (FSAs) seem quite similar. They both offer ways to pay for a portion of your — or your family’s — medical expenses with pretax dollars. And in both cases, you make tax-deductible contributions to an account and then draw from it to pay for certain eligible medical expenses.
But the two accounts have many differences worth paying attention to. Here’s what you need to know.
|
HSA |
FSA |
Who’s eligible |
Anyone enrolled in a qualifying high-deductible health plan (HDHP) who has no other coverage |
Anyone with health insurance through an employer |
Who owns the account |
Employee |
Employer |
Who’s covered |
You, your spouse, dependents and children under 27 |
You, your spouse, dependents and children under 27 |
What you can use it for |
|
Current healthcare expenses |
What’s covered |
|
|
Withdrawals for non-medical expenses |
|
Not allowed |
How to use it |
or
|
Make a claim through your employer for reimbursement; you’ll need proof of both the expense and the fact that your insurance didn’t cover it |
Use-it-or-lose-it provision |
None; your HSA assets roll over from year to year |
|
Ability to invest |
Yes; many HSA providers allow consumers to invest in mutual funds |
No |
Ability to save for healthcare costs in retirement |
Yes; HSA savers can hold their investments indefinitely |
No |
2021 contribution limits |
|
$2,750 |
Read about the impact HSAs can have on retirement savings
1 Healthcare.gov, https://www.healthcare.gov/have-job-based-coverage/flexible-spending-accounts/
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