Health savings accounts (HSAs) and flexible spending accounts (FSAs) are fantastic options for saving tax-free money toward healthcare costs, and many employers offer access to these benefits for employees. While it would be nice to take advantage of both types of accounts at once, you can’t contribute to both an HSA and an FSA at the same time in most cases.

One of the few ways to make this happen is if you have a limited-purpose flexible spending account (LPFSA). This type of account is generally used for dental and vision expenses instead of general healthcare expenses.

Choosing One or the Other

Because you can’t have both an HSA and a traditional FSA at the same time, it’s a good idea to consider the benefits of each if you’re forced to choose. Each account type has its pros and cons, and given the choice, you would be wise to research which option works best with your current healthcare needs as well as your anticipated healthcare expenses.

Choosing an HSA

An HSA allows you to have money deducted from your paycheck to be put into a savings account. This account is connected to a debit card in most cases, and this card can be used at your doctor’s office, your pharmacy, and other healthcare facilities where you might need to pay for medical costs. Your employer may also contribute funds to your HSA, and any money you contribute is exempt from federal taxes. The money you save stays in your account from year to year, meaning it rolls over.

Choosing an FSA

An FSA is similar to an HSA in that it allows you to save tax-free money to be used for healthcare expenses. FSA deductions can reduce your taxable income since the money you contribute is not counted toward your overall income despite being the money you earned. FSA deductions are also limited each year, just like HSA deductions. At the end of the year or benefit period, you must spend any existing funds in your FSA, or they will be forfeited. FSA funds do not roll over.

Author Resource:-

Daniel Stewart has been helping people with their money management and personal finance with over 15 years’ experience in business finance. You can find his thoughts at health investment blog.