HSA and FSA stand for Health Savings Account and Flexible Spending Account, respectively. They are both accounts that allow you to set aside money before taxes to pay for qualified medical expenses. This can be a great way to save money on healthcare costs, since you'll be using pre-tax dollars.
Here's a quick breakdown of the key differences:
- Eligibility: HSAs require you to be enrolled in a high-deductible health plan (HDHP), whereas FSAs can be used with most health plans offered by employers.
- Carryover: HSAs allow you to roll over any unused funds from year to year. FSAs typically have a "use it or lose it" rule, meaning you forfeit any remaining balance at the end of the plan year (some plans offer a grace period or carryover option).
- Contribution Limits: HSAs generally have higher contribution limits than FSAs.
- Investment Options: HSAs may offer investment options for your contributions to grow over time. FSAs do not.