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I had foregone Dental Insurance this year because all previous years I had spent more paying for the insurance than any procedures cost. Naturally, I had to have a tooth removed and an implant put in this year. Out of pocket, the cost was ~$3,500. I had approximately $3,300 in my HSA account, so I used that first and paid the rest out of pocket with a debit card.

I am expecting a child later this year. Our first child was approximately a $12,000 hospital bill not including any lead-up appointments. As my health insurance is a HDHP, I have a $5,000 deductible. I have $5,016.67 that I can contribute before hitting my annual maximum ($6,650.00) in that account. I intend to max out my contributions to hit $5,000 for the rest of this year, meaning that all expenses related to my future child come from pre-tax HSA dollars.

Is there a similar limit on distributions from the HSA account as there is on contributions? I will be spending a total of $8,200 from this account during the year. I don't think there is and I haven't seen any documentation that states such but I wanted to be sure.

Thanks in advance.

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There is no distribution limit, only a contribution limit. You can empty your HSA completely without tax or penalty, as long as the expenses are used for eligible medical expenses.

In addition, you can reimburse yourself in the future for expenses that you have now, as long as you have an HSA account in place. For example, you said that your dental bill was $3500, and you only had $3300 in your HSA, so you emptied your HSA and paid the rest from your checking account. When you do get more money in the HSA, even if it isn't until next year, you can reimburse yourself for the $200 that you had to pay out of pocket on your dental bill. And if you don't have enough money in your HSA this year to cover all of your birth expenses (congrats, by the way), you can reimburse yourself in a future year.

Just make sure you keep good records on what the distributions were used for, in case you get audited.

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There is no limit on the output maximum in one year. The strength of the HSA is that if you don't spend all the money in the account, it rolls over to the next year. The benefit is that if a few years down the road you get a huge medical bill you are protected because you can pull it out of the HSA.

The goal for me was to build up the account to a level that even if I had to may the maximum out of pocket for my insurance policy the money game from previous years deposits and current year deposits.

Even you ever have the situation where the employer doesn't offer a high deductible plan the money for co-payments and medicines can still be pulled from the pre-existing HSA.

If the government did limit you to withdraws not exceeding current year deposits the roll over feature would be worthless.

  • +1 but disagree with last line. If max withdrawal were $6500 or whatever, not losing the money is still a great benefit. Remember, the FSA accounts' 'use it or lose it' really discourages people from ever using it at all. – JoeTaxpayer May 3 '15 at 13:03
  • @JoeTaxpayer I think mhoran_psprep means that if you contributed $6500 per year and you were limited to withdrawing $6500 per year, then any rollover would be forever inaccessible. Yes, it would be there in the account on paper, but you could never withdraw it. Say in year 1 you deposit $6500 and withdraw $5000. So you roll over $1500. The next year you deposit another $6500, total $8000. But if you can only withdraw $6500, you have to still leave the $1500 rollover. Etc every year. Let me repeat that that's NOT the rule so this is a hypothetical problem. – Jay Jul 27 '15 at 13:46
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There is no distribution limit.

Even if you distributed more than your medical expenses, the excess would be taxed and penalized, but it would still be distributed, and the penalty would be based on the amount that wasn't for medical expenses, regardless of the total amount.

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