HRAs and FSAs are accounts used to save on taxes and pay for a qualified medical, prescription, dental, and vision expenses. Spelled out: HSA is a health savings account. FSA is a flexible spending account. If you do not use this benefit, you lose it. Unless your plan has a grace period, FSA funds expire at the end of each year. Be sure to utilize these funds while you can. The 2020 care act allowed you to roll over all unspent FSA funds from one year to the next or give you longer to spend the money. That relief ends this year. If you are allowed to roll over your FSA there will be a limit of $570 HSA versus FSA:
- Both offer tax benefits and have annual contribution limits
- You must have a high-deductible insurance plan to qualify for an HSA
- Funds from an HSA roll over year after year
- Some HSAs offer investment options
- FSAs work on a “use it or lose it” basis
Expenses covered by an FSA:
- To pay deductibles and copayments
- Prescription medications and over-the-counter meds with a prescription from a doctor
- Reimbursements for insulin
- Medical equipment such as crutches
- Diagnostic devices like blood sugar monitors
- Prescription eyeglasses, contact lenses, and necessary supplies
- Medically necessary treatments, for example, laser eye surgery, routine eye exams, and eye surgery to correct vision
- Dental procedures that treat or prevent dental disease like cleanings, root canals and fillings
A complete FSA-eligible expenses list can be found on the IRS website, IRS publication 752, or check with your employer about your specific plan.
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