ADHD and Taxes: Do You Need a Flexible Spending Account or a Health Savings Account?

Health Writer

ADHD is a medical diagnosis. You are bound to have health bills throughout the year to pay for your treatment. There are health insurance premiums, co-payments for doctors visits and prescriptions, therapy sessions and more. Depending on your insurance plan, you may benefit from having either a Flexible Spending Account or a Health Savings Account to help you pay your bills and save on your taxes.

Flexible Spending Accounts

Flexible Spending Accounts (FSA) can be used for a number of different expenses, such as dependent care, but the most common are those set up for health related expenses. FSAs are set up through employers and because deposits made into these accounts are not subject to payroll taxes, they can save you money.

Money placed into an FSA can be used to pay deductibles, copayments and coinsurance as well as expenses not covered by insurance, such as dental costs, cosmetic surgery, or items purchased to improve overall health. Any expenses must be used to treat or prevent a specific medical condition. This can mean supplies to help manage diabetes or the cost of bandages to treat cuts. Normally, expenses allowed under the Internal Revenue Service (IRS) as a medical tax deduction are allowable expenses for an FSA .

The IRS does not place any limits on how much money can be placed in an FSA but some employers will place a cap on the amount an individual employee can contribute. Usually, the employee will receive a debit card to use for qualified expenses. If no debit card is used, employees will need to submit receipts and be reimbursed for any money spent.

Funds placed into an FSA cannot be rolled over and any funds not used by the end of the year are forfeited.

Health Savings Account

Health Savings Accounts (HSA) are available to those individuals enrolled in a high deductible ($1,000 or higher annual deductible) health insurance plan. Unlike FSAs, any money deposited into an HSA is rolled over, will accumulate from year to year and are owned by the individual. Money deposited into the HSA are not subject to federal income taxes, unless withdrawn and used for non-medical expenses.

The U.S. government does place limits on how much can be deposited into an HSA in any given year. These amounts may change from year to year, so it is important to check current limitations.

Money in an HSA can be used for medical deductibles, copayments, dental or vision care, chiropractic care, medical equipment, eyeglasses, hearing aids, transportation costs and other medically related expenses.

Depending on the HSA, the individual may be given a debit card to use for expenses, may be issued checks or may need to submit receipts for reimbursement.

Differences Between FSA and HSA

One of the main differences between a Flexible Spending Account and a Health Savings Account is that money deposited in an FSA must be used by the end of the year or it is forfeited back to the employer. (For those people with FSAs, it is a good idea to check your balance toward the end of the year. Because money can be used for non-prescription items, if there is money in the account, it would be a good time to stock up on cold/flu medications, go to the dentist or purchase new eyeglasses.) Deposits made to a HSA belong to the individual and roll over from year to year and continue to accumulate.

Other differences include:

  • Only individuals with a high deductible health insurance plan are eligible to open a HSA. Any person employed by a company that offers an FSA is eligible to participate.

  • An FSA helps in reducing all payroll taxes for contributions made. For an HSA, money deposited is not subject to federal withholding taxes and will remain tax free as long as it is used for medical expenses.

  • FSA accounts are not individual accounts but are tied to an employer. If you change your employer, your FSA does not follow you. HSA accounts, however, belong to the individual and even if you no longer have a high deductible insurance plan, you remain in control of the money in the account, although you would no longer be able to make additional contributions.

Depending on your individual situation, having either an FSA or an HSA may save you money on your taxes. It may be beneficial for you to discuss both options with a financial planner to decide which would be best for you. Although it may be too late to help you with this year's taxes, it is never to early to begin planning for next year.

This article is part of a series on taxes here on the ADHD page.   To view the rest of the series, see below:

Medical Tax Deductions for ADHD Related Expenses

10 Tips to Help You Do Your Taxes

Preparing for Next Year's Taxes


Publication 969-Health Savings Accounts and Other Tax-Favored Health Plans, 2010, Internal Revenue Service,

"Flexible Spending Accounts Can Lower Tax Bills", 2009, Kay Bell,

"Understanding a Health Savings Account", 2007, Author Unknown,

"HAS/FSA/HRA Comparison Chart", Date Unknown, Author Unknown, Shore Benefits Brokerage