Spending Accounts

As a health care consumer, you may want to consider a spending account. With spending accounts, you may be able to pay for eligible health expenses out of accounts that enjoy certain tax advantages.

Spending accounts come in one of three forms:

Health Savings Accounts (HSA)

HSAs are member-owned savings accounts that provide a tax-advantaged vehicle for medical expenses. HSAs can be funded by an employer or an individual and must be paired with a high deductible health plan. HSA funds belong to individuals, so they can keep the funds if they change jobs or health plan coverage.

Health Reimbursement Accounts (HRA)

An HRA is an employer-funded account. Money in this account, which is generally not taxable, can be used to pay for certain medical expenses. Funds in your HRA may roll over from year to year, but it is up to your employer to determine how much.

Flexible Spending Accounts (FSA)

If you sign up for an FSA, money is taken straight out of your paycheck to fund a spending account. With these pre-tax dollars, you can cover certain medical or dependent care expenses. (Money from your dependent care FSA could be used to pay daycare costs, for example.) Funds in your account not spent by the end of the year return to your employer. If you leave your employer, you also lose the money in your FSA account.

For a complete list of qualified eligible medical expenses, visit IRS.gov and search for “Pub 502.”