FSA vs. HSA: What’s the Difference?

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The yearly open enrollment period when patients can enroll in a health insurance plan is from November 1 to December 15th. Buying and understanding health insurance can often be confusing, especially when it comes to the Flexible Spending Account (FSA) and the Health Savings Account (HSA). Both accounts are special tax-advantaged accounts (pre-tax dollars) where you can save money for healthcare expenses. Both FSA and HSA accounts can help you pay for qualified expenses related to healthcare, which frequently includes copays, prescription costs, and deductibles. However, there are some important differences which you should consider when determining which accounts to use.

To be eligible for an HSA account, you have to be enrolled in a high-deductible plan, meaning your insurance minimum deductible has to be at least $1,300 for an individual and $2,600 for a family. An individual can contribute up to $3,400 a year while a family can give a maximum of $6,750.  The funds can also be rolled over year after year, and some employers make contributions. There is a 20% penalty for using HSA or FSA funds for non-qualified expenses.

Flexible Spending accounts have similar benefits to the HSA, but to individuals with a higher premium and lower deductible. FSA accounts are owned by the employer but held in the employer’s name. You can contribute up to $2,550 as an individual, however, the funds cannot be rolled over. Remember that FSA accounts are use-it-or-lose-it type benefit. If you don’t use the money you deposited before the year-end, you forfeit all of the funds.

Dental Treatment

Qualified medical expenses are those expenses that would generally qualify for the medical and dental expenses deduction. These are explained in IRS Publication 502 Medical Expenses.

You can include in medical expenses the amounts you pay for the prevention and alleviation of dental disease. Preventive treatment includes the services of a dental hygienist or dentist for such procedures as teeth cleaning, the application of sealants, and fluoride treatments to prevent tooth decay. Treatments to alleviate dental disease include services of a dentist for procedures such as X-rays, fillings, braces, extractions, dentures, and other dental ailments. You can include in medical expenses the amount you pay for artificial teeth. You can’t include in medical expenses amounts paid to whiten teeth. Dental Veneers is eligible with a Letter of Medical Necessity from a physician.

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