FSA and HSA for Medical Bills

Tax-Advantaged Healthcare Accounts

FSAs and HSAs let you pay for medical expenses with pre-tax dollars, reducing your overall healthcare costs.

Health Savings Account (HSA)

What It Is

A personal savings account for medical expenses:

• You own it (it's yours even if you change jobs)
• Contributions are tax-deductible
• Earnings grow tax-free
• Withdrawals for medical expenses are tax-free

Who Can Have One

To contribute to an HSA, you must:

• Be enrolled in a High Deductible Health Plan (HDHP)
• Not be covered by other non-HDHP insurance
• Not be enrolled in Medicare
• Not be claimed as a dependent

Contribution Limits (2024)

Category	Limit
Self-only coverage	$4,150
Family coverage	$8,300
Catch-up (55+)	Additional $1,000

Key Benefits

• Triple tax advantage: Tax-deductible contributions, tax-free growth, tax-free withdrawals
• Rolls over: No "use it or lose it" - balance carries forward forever
• Portable: Account stays with you
• Investment option: Can invest balance for growth
• Retirement: At 65, can withdraw for any purpose (taxed as income)

Flexible Spending Account (FSA)

What It Is

An employer-sponsored account for medical expenses:

• Funded through payroll deductions
• Contributions are pre-tax
• Use for qualified medical expenses

Healthcare FSA

• For medical, dental, and vision expenses
• 2024 contribution limit: $3,200
• Use for expenses not covered by insurance

Limited Purpose FSA

• Available if you have an HSA
• Only for dental and vision expenses
• Allows HSA for other medical expenses

Dependent Care FSA

• For childcare expenses (separate from healthcare FSA)
• Not for medical expenses
• Up to $5,000 per household

Use It or Lose It Rule

• Funds typically must be used within plan year
• Some plans offer grace period (2.5 months)
• Some plans allow $640 rollover (2024)
• Check your specific plan rules

HSA vs FSA Comparison

Feature	HSA	FSA
Ownership	You	Employer
Rollover	Unlimited	Limited or none
Portability	Yes	No
Requires HDHP	Yes	No
Investment option	Yes	No
Contribution limit (2024)	$4,150/$8,300	$3,200

Eligible Expenses

Medical Expenses

• Doctor visits and copays
• Prescription medications
• Lab tests and X-rays
• Hospital services
• Medical equipment
• Mental health services

Dental Expenses

• Cleanings and exams
• Fillings and crowns
• Orthodontia
• Dentures

Vision Expenses

• Eye exams
• Glasses and contacts
• Laser eye surgery
• Contact lens solution

Other Eligible Items

• Bandages and first aid supplies
• Thermometers
• Blood pressure monitors
• Sunscreen (SPF 15+)
• Menstrual products
• Over-the-counter medications

Not Eligible

• Cosmetic procedures
• Health club memberships
• Toiletries (unless specific medical use)
• Insurance premiums (generally, with some HSA exceptions)

Using Your Account for Bills

HSA

1. Pay medical bill (any method)
2. Reimburse yourself from HSA, OR
3. Pay directly from HSA (debit card, check, or transfer)
4. Keep receipts for tax documentation

FSA

1. Pay medical bill
2. Submit claim for reimbursement, OR
3. Pay with FSA debit card
4. Provide receipts if requested

Strategies

HSA Strategies

• Contribute the maximum if you can
• Consider investing for long-term growth
• Save receipts - reimburse later if needed
• Use as retirement savings vehicle

FSA Strategies

• Estimate carefully to avoid losing money
• Use for predictable expenses (glasses, prescriptions)
• Check rollover or grace period rules
• Spend down before year end if needed

Record Keeping

For both accounts, keep:

• Receipts for all purchases
• EOBs for services
• Prescription records
• Documentation of medical necessity

Tax-advantaged accounts are powerful tools for managing healthcare costs. Understand your options and use them wisely.