What's an FSA, HSA, 529? How they work and how to use them to cut taxes, build wealth.

When it comes to tax-advantaged savings accounts, there are many options available to individuals and families. These accounts can be used to save for college, retirement, and other long-term goals. Three of the most popular accounts are the Flexible Spending Account (FSA), Health Savings Account (HSA), and 529 Plan. Each of these accounts offers unique benefits, and understanding how they work and how to use them can help you save money and build wealth.

Flexible Spending Account (FSA): An FSA is a pre-tax benefit account that allows you to save money for eligible medical expenses. The money in your FSA is deducted from your paycheck before taxes, which reduces your taxable income and lowers your taxes. Eligible expenses include medical, dental, vision, and certain over-the-counter medications. The money in your FSA must be used within the plan year or it will be forfeited.

Health Savings Account (HSA): An HSA is a tax-advantaged savings account that can be used to pay for eligible medical expenses. The money in your HSA is deducted from your paycheck before taxes, which reduces your taxable income and lowers your taxes. Eligible expenses include medical, dental, vision, and certain over-the-counter medications. The money in your HSA can be invested and the earnings are tax-free. Additionally, if you use the money in your HSA for eligible medical expenses, you can withdraw the money tax-free.

529 Plan: A 529 plan is a tax-advantaged savings plan that can be used to save for college. The money in your 529 plan is invested and the earnings are tax-free. Additionally, if you use the money in your 529 plan for eligible college expenses, you can withdraw the money tax-free.

Using these accounts can help you save money and build wealth. By saving money in an FSA, HSA, or 529 plan, you can reduce your taxable income and lower your taxes. Additionally, the money in these accounts can be invested and the earnings are tax-free. This can help you build wealth over time.

It’s important to understand how these accounts work and how to use them to maximize the tax benefits. Be sure to research the rules and regulations associated with each account to ensure you’re taking advantage of all the benefits. With the right planning and strategy, you can use these accounts to save money and build wealth.