What are the tax benefits of FSAs and HSAs?

What are the tax benefits of FSAs and HSAs?

Both FSAs (Flexible Spending Accounts) and HSAs (Health Savings Accounts) offer tax advantages. Contributions to these accounts are made pre-tax, reducing your taxable income.

How much can I contribute to each account?

For 2023, the contribution limit for HSAs is $3,850 for individuals and $7,750 for families. FSAs have a limit of $3,050.

Can I use both an FSA and an HSA?

Yes, you can use both, but there are specific rules. Generally, you must have a high-deductible health plan to qualify for an HSA.

What happens to the money in these accounts if I don't use it?

FSA funds typically expire at the end of the plan year, while HSA funds roll over and can be used in future years.

Are there any penalties for withdrawing HSA funds for non-medical expenses?

Yes, if you withdraw HSA funds for non-medical expenses before age 65, you'll face a 20% penalty plus income tax on the amount.