03/08/2025
Cover healthcare costs efficiently
Both health savings accounts (HSAs) and health flexible spending accounts (health FSAs) could allow you to sock away tax deductible or pretax contributions to pay for certain medical expenses your insurance doesn’t cover.
But there are key differences to these accounts. Most notably, you must purchase a high-deductible health insurance plan and you cannot have disqualifying additional medical coverage, such as a general-purpose health FSA, in order to take advantage of an HSA. Also, unless the FSA is a “limited purpose” FSA, you cannot contribute to both accounts.
One important benefit of HSAs is that you don't have to spend all of the money in your account each year, unlike a health FSA. Generally, the funds you contribute to a health FSA must be spent during the same plan year. However, some employers allow you to roll over as much as $660 for 2025 in health FSA funds from year to year, and others allow a grace period of up to 2½ months following the end of the year to use your unspent funds on qualified benefit expenses incurred during the grace period.
Also, you can deposit funds into an HSA up to the tax filing due date in the following year (up to the maximum dollar limit) and still receive a tax deduction. For example, you can make your 2024 contribution by April 15, 2025. Meanwhile, health FSA contributions are generally only elected during open enrollment or when you become an employee of a company.
Be sure to check your employer's rules for health FSA accounts. If you have a balance, you may want to consider estimating and planning your health care spending for the remainder of this year. In addition, see if the account balance can be used to reimburse you for qualified medical costs you paid out-of-pocket earlier in the year.
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