Say I have $2000 in my HSA account and have a $1000 medical bill in 2012. If I were to pay the $1000 bill out of pocket and let that $1k left earn interest in my HSA for a significant amount of time (say 10 or 20 years), would I then be able to withdraw the original $1000? Or does a medical expense have to be reimbursed in the year the expense occurred? If I can do it years later, what proof would I need to show?

It seems I could be getting tax-free interest by leaving the $1k in the HSA. However, I'm having a hard time getting a specific answer to this. If anyone knows where to point me to something concrete, I would really appreciate it.

3 Answers 3


An article at HSA Benefit Consulting suggests no time limit for withdrawals.

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    Welcome to SE. If other answers are more helpful, you should re-award "best." I won't take offense. Glad this helped. Feb 3, 2012 at 22:19

I realize this is an old question, but it is a great question, as many people don't realize the hidden benefits of the HSA. If you are eligible for an HSA, it is important to open an account before you have any medical expenses (including dental). Once the account is open every valid medical expense you incur after that (not premiums though) is eligible to be reimbursed, and at any time. The HSA is theoretically like taking the best of the Traditional and Roth IRAs and combining them: you get pre-tax contributions like a Traditional IRA, but also tax free growth and distributions like a Roth IRA. (But only if you use the distributions for qualified medical and dental expenses.) And if somehow you manage to make it to age 65 and have much more money in your HSA than you have qualified expenses for, you can take out the excess in distributions and only pay tax on the earnings the same way you would with a traditional IRA. Really the only downside is having to save decades of receipts!

Update: Here is the IRS confirmation of allowed "delayed distributions":

Q-39. When must a distribution from an HSA be taken to pay or reimburse, on a tax-free basis, qualified medical expenses incurred in the current year?

A-39. An account beneficiary may defer to later taxable years distributions from HSAs to pay or reimburse qualified medical expenses incurred in the current year as long as the expenses were incurred after the HSA was established. Similarly, a distribution from an HSA in the current year can be used to pay or reimburse expenses incurred in any prior year as long as the expenses were incurred after the HSA was established. Thus, there is no time limit on when the distribution must occur. However, to be excludable from the account beneficiary’s gross income, he or she must keep records sufficient to later show that the distributions were exclusively to pay or reimburse qualified medical expenses, that the qualified medical expenses have not been previously paid or reimbursed from another source and that the medical expenses have not been taken as an itemized deduction in any prior taxable year. See Notice 2004-2, Q&A 31 and also Notice 2004-25, for transition relief in calendar year 2004 for reimbursement of medical expenses incurred before opening an HSA.

  • Aren't calendar year expenses eligible even if they occurred prior to account opening? And surely, people 65 and older will have medical costs that will burn through most HSA money. With the exclusion of 10% of ones income before they can write off expenses on their taxes, the HSA is more needed than ever. Welcome to Money.SE. Jun 26, 2014 at 11:32
  • @JoeTaxpayer - the actual IRS wording is: "For HSA purposes, expenses incurred before you establish your HSA are not qualified medical expenses. State law determines when an HSA is established." I believe most states consider an HSA to be established on the date at which it is first funded, so in that case, unfortunately you have to open the bank account with a small seed before any medical expenses can be eligible. And I agree that people over 65 most likely won't have to worry about having excess, which is why I worded it as "if somehow you manage to..." :)
    – TTT
    Jun 26, 2014 at 16:58
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    @JoeTaxpayer- I just found this too which clarifies it better: "Expenses incurred before an HSA is established are not qualified medical expenses. Notice 2004-2, Q&A-26. Although § 223(b)(8) and this notice provide that certain individuals are treated as eligible individuals on the first day of the taxable year in determining the contribution amount, an HSA is not established before the date that the HSA is actually established. See also Notice 2007-22, 2007-10 I.R.B. 670."
    – TTT
    Jun 26, 2014 at 17:02

Form 8889 is used to document HSA distributions. It boils down to, "1) How much did you withdraw? 2) What were your medical expenses? 3) If (1) > (2), give us money."

HSA distributions must be for "qualified medical expenses", defined as "unreimbursed medical expenses that could otherwise be deducted on Schedule A (Form 1040)". From here (PDF). You certainly couldn't deduct 2014 medical expenses on your Schedule A in 2033, so I doubt you could count them as 'qualified' for HSA purposes either.

  • The definition doesn't say anything about when though. It could certainly mean (and I believe it does), "unreimbursed medical expenses that could otherwise be deducted on Schedule A (Form 1040) in the year the expense occurred". Unlike Schedule A where you need to take the deductions that year, there isn't any specification of when you have to take HSA distributions for those eligible expenses.
    – TTT
    Jun 26, 2014 at 17:36
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    I found the IRS link refuting your claim- I updated my answer with a link to it
    – TTT
    Jun 26, 2014 at 17:47
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    Wow, thanks for the information. I'm tempted to delete my answer, but I want to leave it here for anyone else who finds this. Now I'm imagining fully-funding an HSA, meticulously documenting every health expense I have, and then taking a single gigantic distribution in 2037 or so.
    – Shawaron
    Jun 26, 2014 at 18:54
  • Yes- that is a side effect of the HSA which makes it a good investment tool. If you can afford to pay your out of pocket medical expenses with after tax money today, then you can take advantage of tax free growth on that amount by leaving it in the HSA.
    – TTT
    Jun 27, 2014 at 18:32

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