Flexible Spending Accounts and Health Savings Accounts are both great ways to reduce your income taxes by paying for medically related expenses with pre-tax money. Both types of accounts work similarly, in that you can deposit pre-tax money into the account, and use the account to pay for various tax-deductible medical expenses as they occur. There are also many differences:
|Account Ownership||Your FSA account is set up and owned by your employer.||The HSA account is a bank account owned by you, regardless of where you work.|
|Use It Or Lose It||Yes, any money you do not spend in your FSA at the end of the year is forfeited back to the company. On the other side, If you happen to leave before the year is over, and you have already spent more FSA money than what has been deducted from your paycheck, that extra money is yours to keep.||No, any unused funds in your HSA at the end of the plan year are yours to keep, and stays in your account indefinitely until you spend it.|
There are also many other categories which may provide different benefits such as eligibility, contribution limits and changes, access to funds, and substantiation. FSAs are typically run by your employer so if you have further questions about those, talk to your employer. If you have questions about an HSA give us a call at (866) 499-BANK or come into one of our branches!