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Question: How Should I handle Health Savings Account (HSA) and Flexible Spending Account (FSA) Balances?
Answer: Our approach to Health Savings Account and Flexible Spending Accounts is as follows:
1. When the contribution is made, we treat it as a deduction. Enter it in the appropriate living expense category (health insurance or child care, usually), and choose a tax category of "FSA, Flex, Caf Etc."
2. When the actual expenditure out of the HSA is made, later, we do not treat it as an expenditure at the later point, having deducted it when the contribution into the account was made.
3. We do not consider the asset value of the amount in the account, for a similar reason.
To summarize, we treat Health Savings Account and Flexible Spending Account contributions as if they are current expenses for medical purposes. This is the essential nature of the transaction. All that is happening after that is a delay with respect to when the medical or other expense is actually paid.