What’s the Difference Between an FSA and an HSA?

An FSA is a workplace account that you get from your employer. It lets you save pretax income to use for medical expenses. It’s more like a spending account than a savings account, though: Typically, you must use the money you contribute within a year or you lose it.

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At the beginning of the year, you decide how much money you want to put in your FSA. Your employer takes that amount out of your paycheck before the taxes on your earnings. You can use the money in your FSA to pay for qualified medical expenses throughout the year. Employers can also contribute to FSAs, but they aren’t required to do so.

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The big advantage of an FSA is that you don’t pay federal, state, or Social Security taxes on the money you contribute and spend on medical purposes. FSAs can also be used alongside any type of employer health plan.

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