As open enrollment season approaches, many individuals and families are reviewing their healthcare options and making decisions for the upcoming year. One common question that arises during this time is whether or not a family can have both a Flexible Spending Account (FSA) and a Health Savings Account (HSA) when filing taxes jointly. In this blog post, we will explore the rules and regulations surrounding FSAs and HSAs for married couples filing jointly, and discuss the importance of consulting with a tax advisor for personalized guidance.
FSA and HSA: Understanding the Basics
Before delving into the specifics of FSAs and HSAs for married couples, it is important to have a basic understanding of what these accounts are and how they work. Both FSAs and HSAs are tax-advantaged accounts that are used to pay for eligible healthcare expenses. However, there are some key differences between the two.
An FSA is an employer-sponsored benefit that allows employees to set aside pre-tax dollars to pay for out-of-pocket healthcare expenses. These expenses can include deductibles, copayments, and certain medical products and services. FSAs are typically “use it or lose it” accounts, meaning that any funds left over at the end of the plan year are forfeited.
On the other hand, an HSA is a personal savings account that is used to pay for eligible medical expenses. In order to qualify for an HSA, an individual must be enrolled in a high deductible health plan (HDHP). Unlike FSAs, the funds in an HSA can roll over from year to year, and can even be invested to potentially grow over time.
The Rules for Married Couples
Now, let’s address the main question at hand: Can a family have both an FSA and an HSA if they file taxes jointly? The short answer is yes, but it’s not quite that simple. There are a few important rules and restrictions that must be followed.
First and foremost, both spouses must be eligible for an FSA and/or an HSA. This means that both spouses must have their own individual accounts, rather than a joint account. If only one spouse is eligible for an FSA or HSA, then the couple cannot have both accounts.
Additionally, there are contribution limits for both FSAs and HSAs that must be followed. For an FSA, the maximum contribution amount for 2021 is $2,750 per individual. This means that if both spouses have an FSA, they can contribute a total of $5,500 for the year. For an HSA, the maximum contribution amount for 2021 is $3,600 for individual coverage and $7,200 for family coverage. This means that if both spouses have HSAs, they can contribute a total of $14,400 for the year.
It is also important to note that if one spouse has an FSA and the other has an HSA, the total combined contributions to both accounts cannot exceed the annual limit for HSAs. In this scenario, the total contributions to the FSA would need to be subtracted from the HSA limit to determine the maximum contribution amount for the HSA.
Consulting with a Tax Advisor
As with any tax-related matter, it is always recommended to consult with a tax advisor for personalized advice. A tax advisor can help married couples determine the best course of action for their specific situation and ensure that all rules and regulations are being followed.
In addition, a tax advisor can also offer guidance on other important factors to consider when deciding between an FSA and an HSA, such as the potential tax benefits and investment opportunities of an HSA and the “use it or lose it” aspect of an FSA.
In conclusion, it is possible for a family to have both an FSA and an HSA when filing taxes jointly. However, there are important rules and restrictions that must be followed, and it is recommended to consult with a tax advisor for personalized guidance. With the right information and guidance, individuals and families can make informed decisions about their healthcare options and maximize their tax savings.
Remember, open enrollment season is the perfect time to review your healthcare options and make any necessary changes. Be sure to carefully consider the benefits and limitations of both FSAs and HSAs before making a decision, and seek professional advice if needed. By taking the time to understand your options and plan accordingly, you can set yourself and your family up for a healthier and financially secure future.