Many see these letters and think, what are they?
Others confuse the two, and think HSA and FSA are the same type of account.
Health savings plans and flexible spending accounts become accessible to you based on what kind of health coverage plan you sign up for, but both let you tuck away pretax dollars for future qualified medical costs. Using one or both of these accounts can mean big tax savings that you may not be aware of.
However, HSAs and FSAs have distinct differences as well as advantages. Here are the ins and outs of each.
Health Savings Account – Created in 2003, your contributions are made pretax, money in the account grows tax-deferred, and distributions for HSA qualified health-care expenses are tax-free.
Flexible Spending Account – Been around since the 70’s, your contributions are made pretax and distributions for FSA qualified health-care expenses are tax-free.
The Differences-HSA vs. FSA
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The two accounts sound similar but have important differences which give each their advantages. Discuss with your financial planner if you would qualify for either of these options and how they fit into your financial plan.
