(MoneyHippo.com) – Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) are both types of tax-advantaged accounts that allow individuals to set aside money for healthcare expenses.
The purpose of an HSA is to help individuals save for qualified medical expenses, such as deductibles, copayments, and other out-of-pocket costs. To be eligible for an HSA, you must be enrolled in a high-deductible health plan (HDHP). Contributions to an HSA are tax-deductible, and withdrawals for qualified medical expenses are tax-free. The funds in an HSA can be carried over from year to year and can be invested to grow tax-free.
The purpose of an FSA is similar to an HSA, but it’s available to anyone who has access to an FSA through their employer. Contributions to an FSA are also tax-deductible, and withdrawals for qualified medical expenses are tax-free. However, unlike an HSA, the funds in an FSA must be used by the end of the plan year or they will be forfeited.
Both HSAs and FSAs can be used to pay for a variety of qualified medical expenses, including doctor visits, prescription medications, and medical equipment. They can help individuals save money on healthcare expenses and make it easier to budget for medical costs.
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