So, what even is an HSA (health savings account) or FSA (flexible spending account?) Well, you are in luck today because I’m going to give you all the deets!
Both, HSAs and FSAs, are tax-advantaged accounts that allow you to save specifically for medical costs. Let’s break down the details for each type of account:
- An HSA is available to people who have a qualifying high-deductible health plan. Medicare-eligible individuals and those who can be claimed as a dependent are not eligible for an HSA.
- An HSA includes a number of benefits, including employer funding, pretax payroll deductions, and tax-deductible contributions up to the annual contribution cap.
- HSA funds can also be invested while also rolling over year to year tax-free to help save for future medical costs.
- The greatest advantage of an HSA is the ability to withdraw funds for qualified medical expenses, and not pay taxes on the money! This provides a triple benefit in terms of tax savings since it gives the ability to deduct your contributions, and avoid paying taxes on account interest or investment gains as well as on withdrawals from the account.
- FSAs are offered as a part of a benefits package from an employer. As with an HSA, contributions are pretax and distributions are tax-free and can only be used for eligible medical expenses. This is where the similarities end.
- In contrast, an FSA has less flexibility, does not accompany you when you move jobs, has a lower contribution limit, and a balance that is "use it or lose it” by the end of the year or an approved grace period.
- Tip: Don’t put more money in your FSA than you think you'll spend within a year!
Both HSA and FSA plans are beneficial to have, especially for those with a chronic illness. Patients with chronic illnesses incur significant annual medical costs for things like numerous doctor visits, diagnostic procedures, prescription drugs, and other devices and equipment to help them manage their illness.
What can I buy with my HSA card? What can I buy with my FSA card?
Let’s talk about HSA & HSA eligible items
Your HSA or FSA can be used to pay for most qualified medical expenses. These are defined by IRS Code 213(d) but check with your HSA administrator to double check which expenses are eligible for your plan.
Generally speaking, the following are considered hsa/fsa eligible:
- Medical plan deductibles and copayments
Using the HSA pretax dollars will help you lower your overall healthcare costs.
- Diagnostic tests
Examples of eligible tests include at-home testing, such a diabetic testing kits to in-hospital testing, such as x-rays and CT scans.
- Medical equipment/devices
This covers devices like my husband’s CPAP machine and my Smart Sharps bin along with items such as oxygen equipment and medical aids.
Any medication prescribed by your doctor is HSA/FSA eligible.
- Over-the-counter medications & items
Many common items are HSA/FSA eligible including aceteminophen, cold remedies, allergy products, first aid products, contraceptives, even contact lens solution and so many more!
- Vision and dental care
Routine vision and dental care visits, as well as eyeglasses, contact lenses, and contact lens care are all common eligible expenses.
Other day-to-day health expenses such as bandages, sunscreen, thermometers, etc. may also be HSA/FSA eligible. To get the most out of your account, always double-check what is covered or browse HSA/FSA stores at hsastore.com and fsastore.com.
Fun fact: The FSA store even has a section labeled “surprisingly-eligible”, you can check it out here.
Those of us with a chronic illness know how fast medical expenses can add up! Whether you qualify for an HSA or have access to an FSA, both accounts have benefits that can make managing your out-of-pocket medical expenses easier throughout the year.
My favorite HSA/FSA eligible items: prescription costs, doctor visits and my Smart Sharps Bin subscription!
Disclaimer: This post is sponsored by HealthBeacon plc and the author was compensated and was given a Smart Sharps Bin free of charge. All opinions expressed are those of the authors and do not necessarily reflect the position of HealthBeacon or Hamilton Beach Brands.