HSA & FSA, in plain terms

A Health Savings Account (HSA) and a Flexible Spending Account (FSA) are accounts you fund with money before it’s taxed, to spend on medical care. Because that money was never taxed, paying for care with it is effectively a discount equal to your tax rate.

How it works

If you’re in a combined ~25% tax bracket and you pay for $1,000 of qualifying care with pre-tax HSA dollars, it costs you about $750 in real terms — the same care, roughly 25% cheaper. The catch is the word qualifying: the expense has to be medical care under §213(d). For things that aren’t automatically qualified, that’s exactly what the Letter of Medical Necessity is for.

In practice: A family already spends about $400/month on wellness and in-home support. Routed through an HSA with an LMN, that same spending is paid with pre-tax dollars — saving them roughly $1,440 a year without changing what they actually buy.

Source: IRS Publication 502 (medical and dental expenses) and §223 (HSAs). Effective savings depend on your marginal tax rate, typically 22–30%.

This page is education, not tax, legal, or medical advice. Whether a specific expense qualifies depends on your situation, your plan, and a clinician’s determination — and the rules change. Talk to a tax advisor and your benefits administrator about your own case.