What is the Difference Between an HSA and a Health FSA?
The tax code provides two tax advantageous plans for taxpayers to pay medical expenses. One is a Flexible Spending Account (FSA) and the other is a Health Savings Account (HSA). The two are often misunderstood and their provisions are frequently mixed up by taxpayers who then fail to take advantage of the tax benefits available from these accounts.
This article explains the workings, qualifications, and tax benefits of each with a side-by-side comparison chart of the two programs. Both have a common theme: contribution to both is made with pre-tax dollars (they reduce taxable income) and distributions to pay qualified medical expenses are tax free. After that the two plans are quite different.
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