Although it’s certainly never your goal to get sick and incur medical expenses, it happens to everyone on some level. Whether it’s something as “small” financially as a prescription for your ear infection, or something as “large” financially as a major surgery or chemotherapy, no individual can escape 100% healthy. So, what are some ways to alleviate those medical financial woes? Options include both a medical flexible spending account (FSA) or a health savings account (HSA).

What’s the big difference?

FSA’s are workplace accounts where money is deducted from your gross income, reducing your taxable income, that can be used toward some out-of-pocket medical costs, including insurance copays and prescriptions. HSA’s are only available to individuals with qualifying high-deductible health plans, but contributions are tax-deductible and withdrawals for eligible medical costs are tax-free.

How do I contribute and how much can I contribute?

FSA contributions will come directly out of your paycheck into your account, whereas HSA contributions can be taken out of your paycheck if through your employer, but they can also be made directly by you from your net income and deducted when you file taxes.

As far as the amount you can contribute annually, both are based on inflation. In 2016, FSA contributions could not exceed $2,550 and HSA contributions were limited to $3,350 for individuals and $6,750 for families. For HSA’s though, you can contribute an additional $1,000 if you are 55 or older.

How do I utilize the funds?

FSA’s usually require providing medical receipts to your employer, which you will then be reimbursed for. Some companies offer FSA debit cards, but you may still be asked to provide receipts. HSA’s typically have debit cards linked to your account, but you will still want to document the expenses for tax purposes.

What if I don’t use it all?

FSA’s operate with a “use-it-or-lose-it” mentality. If you don’t utilize all the funds by the end of your benefits period, your employer will pocket the money unless they have a rollover option or grace period. HSA funds have no deadlines for withdrawal, and can even be invested in other funds and used for qualifying medical expenses tax-free, however, if you are under 65 and use the funds for non-medical expenses, you will be taxed, maybe even an additional 20%.

So, it may be tough to say one is better than the other as it really comes down to what you are eligible for in terms of your health plan, as well as what sort of medical spending account your employer may/may not offer. There are certainly pros and cons to both types, and you should, as always, research your options before investing.