Health savings accounts (HSAs) and flexible spending accounts (FSAs) allow you to save for medical expenses with pre-tax dollars, covering costs like deductibles, prescriptions, and more. Contributions and withdrawals from both accounts are tax-free, but eligibility requirements and rules differ. HSAs require a high-deductible health plan, while FSAs are available through employers only.

For tax year 2025, individuals can contribute up to $4,300 and families up to $8,550 to an HSA. Contributions can be made through payroll deductions or deducted on your tax return. HSA funds roll over annually and can earn tax-free interest, with additional investment options available once a savings threshold is reached.

FSAs are funded through employer payroll deductions and have a yearly contribution limit of $3,300 for individuals and $6,600 for married couples filing jointly. Funds do not roll over from year to year, and employers may offer a grace period or carryover options. Reimbursements for qualified medical expenses are tax-free.

Choosing between an HSA and an FSA depends on factors like your health insurance plan, expected medical expenses, and deductibles. HSAs are ideal for those with high-deductible health plans and lower expected medical costs, while FSAs may be better for individuals with higher anticipated expenses and lower deductibles. Evaluate your needs to determine the best fit for you.

Read more at Yahoo Finance: Which account is best for you?