Daniel Stewart

Should I Use My HSA or FSA First?

HSAs and FSAs are both valuable tools for financial planning. They can help you cover the costs of qualified medical expenses while taking advantage of generous tax benefits. Most people have one or the other, but some wonder if you can have both. If so, which should you use first?

HSA vs FSA: What are the Differences?

An HSA, or health savings account, is a triple tax-advantaged plan that allows you to set money aside for qualified medical expenses. Employers can offer HSAs as an employee benefit, but individuals can open them independently if they meet all qualifications.

HSAs stay with you. You can continue funding the account for decades if you maintain a high-deductible health plan (HDHP) and meet other eligibility requirements. There's also the option to invest your contributions, treating the account like a retirement account over the long term. Deciding between HSA vs FSA? Explore this website now for a detailed comparison and choose the best option for your healthcare savings!

FSAs, or flexible spending accounts, are employer-sponsored accounts that allow you to set aside pre-tax dollars for qualified medical expenses. These accounts stay with your employer. Furthermore, the funds in the account don't roll over every year. Therefore, you must use them before the FSA expires.

HSA vs FSA: Can You Have Them at the Same Time?

You cannot have a traditional FSA and an HSA simultaneously. Having an FSA makes you ineligible to open an HSA and vice versa. However, there is one exception.

It is possible to have an HSA with a limited-purpose flexible spending account (LPFSA). An LPFSA works similarly to an FSA. It's a pre-tax benefit you can use for qualified expenses. But as the name implies, those qualified expenses are much narrower than an FSA. You can only use an LPFSA for eligible dental and vision expenses.

If you have an LPFSA and HSA, you should use your LPFSA first. LPFSA funds don't roll over. Therefore, you must use it or lose it. Prioritizing your LPFSA ensures you're maximizing your tax advantage. You can use the LPFSA for vision and dental, saving the funds in your HSA for expenses the LPFSA won't cover.

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.