HSA - Question About Reimbursing

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JI0124
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Joined: Sat Aug 08, 2015 1:06 pm

HSA - Question About Reimbursing

Post by JI0124 »

Hi all! I’ve checked the wiki and done research but I’m also doing a quick post to make sure I understand this. So, sorry if it’s redundant and thanks for the help.

Have an HSA and have qualifying medical expenses this year (orthodontics and medical expenses). Reached limit on dental insurance so most of ortho was out of pocket (~$5k) Also met/exceeded deductible for medical ($3k). So I could reimburse myself from the HSA in theory, $8k.

Other than losing the tax free growth on that money are there any tax implications for 2022 tax year?

Also, if there were qualifying expenses of $3k in 2021 could I take another $3k reimbursement from the account now, without tax implications?

Basically I’m wondering if I have $11k of cash available from my HSA without tax implications for 2022. I understand that in theory it may be the best thing to leave the money invested in the HSA but wanting to understand what I have access to.

Thanks to anyone who can confirm I’m not missing anything here!
tenkuky
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Re: HSA - Question About Reimbursing

Post by tenkuky »

You should just fill out on your tax return that whatever you distributed from the HSA was for eligible health expenses, no tax liability.
If you are averse to record keeping, then do what you plan.
Or you could save receipts and let it grow and pay yourself later.
Some people do one or other or both. I am in the latter (pay myself now and surplus saved for later).
aristotelian
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Re: HSA - Question About Reimbursing

Post by aristotelian »

Yes, there is no "statute of limitations" on qualified expenses. You can take the reimbursement now, or let the funds grow and take it in a year, or 20+ years (as long as the law doesn't change). If you have the ability to cash flow your health expenses, the most tax efficient option is to let the funds grow, similar to a Roth IRA.

When you take a distribution, you will need to fill out a tax form attesting that it was for an eligible expense, but you do not need to provide any additional documentation unless you are audited.
WhiteMaxima
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Re: HSA - Question About Reimbursing

Post by WhiteMaxima »

HSA is my EM. I have the receipt and could get cash anytime.
Topic Author
JI0124
Posts: 83
Joined: Sat Aug 08, 2015 1:06 pm

Re: HSA - Question About Reimbursing

Post by JI0124 »

Thanks for the responses. The perspective of using it as an emergency fund is a helpful way to think about it.
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squirrel1963
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Re: HSA - Question About Reimbursing

Post by squirrel1963 »

I'm keeping detailed track of all expenses with receipts, and plan to get reimbursement as late as possible to let the money grow.
| LMP | safe portfolio: TIPS ladder + I-bonds + Treasuries | risky portfolio: US stocks / US REIT / International stocks |
UNCHEEL
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Re: HSA - Question About Reimbursing

Post by UNCHEEL »

squirrel1963 wrote: Thu Sep 22, 2022 3:02 pm I'm keeping detailed track of all expenses with receipts, and plan to get reimbursement as late as possible to let the money grow.
Ditto!
brian91480
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Re: HSA - Question About Reimbursing

Post by brian91480 »

JI0124 wrote: Thu Sep 22, 2022 2:54 pm Thanks for the responses. The perspective of using it as an emergency fund is a helpful way to think about it.
The problem with that is: What if you have an emergency that requires a HSA withdrawal in a bear market... like right now?

It seems silly to take withdrawals... at a loss... from such a powerful tax free account. And emergencies are probably somewhat correlated to widespread economic downturns.

-- Brian
BeneIRA
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Re: HSA - Question About Reimbursing

Post by BeneIRA »

brian91480 wrote: Thu Sep 22, 2022 8:55 pm
JI0124 wrote: Thu Sep 22, 2022 2:54 pm Thanks for the responses. The perspective of using it as an emergency fund is a helpful way to think about it.
The problem with that is: What if you have an emergency that requires a HSA withdrawal in a bear market... like right now?

It seems silly to take withdrawals... at a loss... from such a powerful tax free account. And emergencies are probably somewhat correlated to widespread economic downturns.

-- Brian
Absolutely. I am a perfect case study. Got hit with big medical expenses I wasn't expecting, so selected a high deductible plan last year for Annual Enrollment. Also hit with dental expenses so paying quite a sum out of pocket all the way around. I invested all but $1,000 of my HSA dollars in Vanguard VSTAX and Total International, so I am down 20% this year. Ouch.
Doc7
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Re: HSA - Question About Reimbursing

Post by Doc7 »

tenkuky wrote: Sun Sep 18, 2022 10:34 am You should just fill out on your tax return that whatever you distributed from the HSA was for eligible health expenses, no tax liability.
If you are averse to record keeping, then do what you plan.
Or you could save receipts and let it grow and pay yourself later.
Some people do one or other or both. I am in the latter (pay myself now and surplus saved for later).

You have to save receipts regardless of whether you are letting it grow or not.
AnEngineer
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Re: HSA - Question About Reimbursing

Post by AnEngineer »

Doc7 wrote: Thu Sep 22, 2022 9:10 pm
tenkuky wrote: Sun Sep 18, 2022 10:34 am You should just fill out on your tax return that whatever you distributed from the HSA was for eligible health expenses, no tax liability.
If you are averse to record keeping, then do what you plan.
Or you could save receipts and let it grow and pay yourself later.
Some people do one or other or both. I am in the latter (pay myself now and surplus saved for later).

You have to save receipts regardless of whether you are letting it grow or not.
True.
Letting it grow and assuming that future medical expenses will consume the balance (or just treating it as a trad IRA) is the path if you really don't want to save receipts, but you'd still want to do it eventually.
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grabiner
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Re: HSA - Question About Reimbursing

Post by grabiner »

brian91480 wrote: Thu Sep 22, 2022 8:55 pm
JI0124 wrote: Thu Sep 22, 2022 2:54 pm Thanks for the responses. The perspective of using it as an emergency fund is a helpful way to think about it.
The problem with that is: What if you have an emergency that requires a HSA withdrawal in a bear market... like right now?

It seems silly to take withdrawals... at a loss... from such a powerful tax free account. And emergencies are probably somewhat correlated to widespread economic downturns.
If you have stock in your HSA, you can use the same strategy to avoid taking the stock loss as for an all-stock taxable account, as in Placing cash needs in a tax-advantaged account. Sell the stock from your HSA, and move an equal amount from bonds to stock in your IRA or 401(k).

The alternative, if you still have a taxable account, is to use the same strategy with your taxable account. Sell stock in your taxable account, and move an equal amount from bonds to stock in your IRA or 401(k); then, in a future year, reimburse yourself from the HSA.

If you don't have a taxable account, and possibly if you would have a large capital-gains tax for selling from the taxable account, it's better to use the HSA. While the HSA has a big tax advantage, you already got most of that advantage when you got the tax deduction on your contributions.
Wiki David Grabiner
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