FSA & HSA: Tax-Free Money for Your Medical Costs

If you're spending money on medical care (and you probably are right now), an FSA or HSA is free money you're leaving on the table. Both let you pay for qualifying medical expenses with pre-tax dollars — meaning you're effectively getting a 20-30% discount on everything from copays to equipment to mileage to doctor appointments. FSA (Flexible Spending Account): - Offered through your employer, enrolled during open enrollment or when you're newly eligible - Use-it-or-lose-it: you generally have to spend the money within the plan year (some plans allow a $640 carryover or a 2.5-month grace period — check yours) - 2026 contribution limit: $3,300 - You can use it for: copays, deductibles, prescriptions, medical equipment, dental, vision, mental health therapy, mileage to appointments, and more - You enroll BEFORE you know your full year of expenses, so estimate generously when you're facing a new diagnosis HSA (Health Savings Account): - Only available if you have a high-deductible health plan (HDHP) — check your plan type - NOT use-it-or-lose-it: the money rolls over forever and is yours to keep even if you change jobs - 2026 contribution limit: $4,300 (self) or $8,500 (family), plus $1,000 catch-up if you're 55+ - Triple tax advantage: contributions are pre-tax, growth is tax-free, withdrawals for medical expenses are tax-free - After age 65, you can withdraw for ANY reason without penalty (just pay income tax on non-medical withdrawals) What you can buy with either (people always underestimate this): - Copays, deductibles, prescriptions - Medical equipment: crutches, braces, CPAP machines, glucose monitors - Mental health: therapy sessions, psychiatric care - Dental and vision (FSA only — HSA covers these too but many people don't know) - Mileage to and from medical appointments (yes, really — track it) - Over-the-counter medications (since the CARES Act) - Menstrual products (since the CARES Act) - Service animal costs - Home modifications for accessibility (if prescribed) What you CAN'T use it for: - Insurance premiums (usually — HSA has some exceptions) - Cosmetic procedures - Gym memberships (unless specifically prescribed for a condition) - Non-prescription vitamins/supplements How to use it: 1. Check whether you have an FSA, HSA, or both (ask HR or check your benefits portal) 2. If FSA: decide your contribution amount during open enrollment — estimate your medical costs for the year and add 10-20% cushion 3. If HSA: contribute what you can, even a small amount helps — the money is yours forever 4. Most plans give you a debit card for medical purchases — use it at the pharmacy, doctor's office, or for online equipment orders 5. If you don't have a card, pay out of pocket and submit receipts for reimbursement 6. Keep all medical receipts — you may need them for reimbursement or for tax filing