Let us introduce you to an excellent way to save money on new glasses and a variety of health services. With this option, you can enjoy significant savings while taking care of your vision and overall health!
What Are FSAs and HSAs?
Health savings accounts (HSAs) and flexible spending accounts (FSAs) are two of the best ways to put money aside tax-free for health care expenses.
An FSA is a tax- advantaged savings account offered by your employer that helps you save money on healthcare costs. You contribute a set amount from your paycheck before taxes, reducing your taxable income. This money can then be used to cover out-of-pocket medical, dental, and vision expenses like copays, prescriptions, and therapy costs.
An HSA is a savings account for medical expenses not covered by insurance. You can use it for doctor visits, prescriptions, over-the-counter medicine, lab tests, and hospital stays.
HSA funds don’t expire like FSAs You can keep them as long as you want and use them whenever needed.
To open an HSA, you must have a high-deductible health plan (HDHP). FSAs don’t require one, anyone with an employer offering an FSA can enroll.
An HSA belongs to you, you keep the funds even if you change jobs. An FSA is employer-owned, so you usually lose the funds if you leave.
The differences between HAS and FSA:
You can use HSAs, FSAs, for eligible medical expenses.
- HSAs are portable, meaning you keep the funds even if you change jobs. FSAs stay with your employer.
- HSA funds grow tax-free, while FSA funds do not.
Important points:
HSAs and FSAs have limits on how much you can contribute each year. These limits can change, so it’s good to check the current limits each year.
You can’t contribute to an HSA and a traditional FSA in the same year. However, HSA holders can use a Limited Purpose FSA for dental and vision expenses and a Dependent Care FSA for childcare costs.
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Benefits:
HSA: Enjoy triple tax benefits, no taxes on contributions, tax-free growth, and tax-free withdrawals for medical expenses.
FSA: You save on taxes when contributing, but funds don’t grow over time
Tips for Setting Up an FSA and HSA
Flexible Spending Account (FSA) Tips:
- Estimate Your Expenses – Plan for medical costs like copays, prescriptions, and vision care to avoid overcontributing.
- Know the Limits – The IRS sets yearly contribution limits (check with your employer for details).
- Use It or Lose It – Spend your funds before the deadline; some plans allow a small rollover or grace period.
- Keep Receipts – Save receipts for eligible expenses in case of an audit or reimbursement request.
- Check Employer Contributions – Some employers contribute to FSAs, so take advantage if available.
Health Savings Account (HSA) Tips:
- Make Sure You’re Eligible – You must have a high-deductible health plan (HDHP) to open an HSA.
- Maximize Contributions – HSAs have higher limits than FSAs, and contributions reduce your taxable income.
- Save for the Future – Unlike FSAs, HSA funds roll over yearly, so they can grow over time.
- Invest Wisely – Some HSAs offer investment options, allowing tax-free growth for long-term medical savings.
- Use for Qualified Expenses – Withdraw funds tax-free for eligible medical costs, or save for future healthcare needs.
Both accounts help you save on healthcare expenses, but choosing the right one depends on your needs and insurance plan.
Final Thought:
An FSA and HAS are a great tool to save money on healthcare while making out of pocket costs, like therapy, more affordable. It requires a bit of planning and organization, but the tax savings and convenience make it worthwhile for many people.