What's the difference between an FSA and an HSA?

Question

Zippia Team · Accepted Answer

A health savings account is an individual account, meaning it's not tied to your employer or employment. Individuals must have a high-deductible health plan (HDHP), with a minimum deductible of $1,400 for individuals or $2,800 for families, in order to sign up for an HSA.

HSAs have a higher annual contribution cap of $3,550 for individuals and $7,100 for families.HSAs are used as more than just a piggy bank for medical expenses - they are investment accounts that you make tax-deductible contributions to, and they grow tax-deferred. Qualified healthcare expenses you pay for through an HSA are also not taxed.

HSAs do not expire each year and automatically rollover. You can withdraw from your HSA savings tax-free after the age of 65. You may also withdraw earlier than that, but you will have to pay income tax if you do and are additionally subject to a 20% penalization.