What is an HSA?
A health savings account (HSA) is a medical savings account that you can contribute to tax-free if you are enrolled in a high-deductible health plan (HDHP). The funds can be used to pay for qualified medical expenses. HSA funds roll over from year to year, as opposed to the FSA which has a “use-it-or-lose-it” rule.
- Must be covered by a qualified HDHP (high-deductible health plan)
- May not be covered by a non-HSA qualified health insurance plan
- May not be enrolled in Medicare
- May not be claimed as a dependent on another person’s tax return
- May not have, or be eligible to use, a general purpose flexible spending account (FSA) – Limited purpose flexible spending accounts are allowed for Vision, Dental, or Dependent Care
- Must not have used VA benefits for anything other than preventative services in the past three months unless receiving benefits for a service related injury or illness.
Can an HSA be combined with an FSA?
If an HSA is combined with an FSA, the FSA needs to be a limited-purpose FSA that only covers certain expenses, such as dental and vision costs.