Can You Use This Years Hsa Money To Pay For Last Years Services

HSA Spending

Note: This is the concluding of a 3-part serial of blog posts. Previous blog posts in the series discussed contributing to an HSA and growing HSA funds.

In a report last year, the Centers for Medicare and Medicaid Services said "U.Southward. health care spending increased four.3% to reach $3.iii trillion, or $ten,348 per person in 2016." The report broke the spending downwards further as follows:

Hospital intendance: "Spending increased 4.7% to $1.i trillion in 2016."
Physician and clinical services: "Spending on doctor and clinical services increased 5.four% to $664.9 billion in 2016."
Prescription drugs: "an increase of 1.three% to $328.6 billion."

Healthcare spending continues to rising, which is i reason health savings accounts (HSAs) are such a beneficial program to millions of Americans. The money saved in an HSA can be spent tax-gratis¹ on qualified medical expenses at present or in the future.

The following are a few things to keep in listen about spending HSA funds:

ane. HSA funds don't have to be spent every year.

Unlike flexible spending accounts, the funds in an HSA do not expire at the end of the twelvemonth — the entire amount rolls over each year. For this reason, HSAs can exist used as part of an overall retirement plan. Virtually people will use their HSA funds at some point to help pay for medical expenses, but at that place is an option to salve those funds for after years.

2. HSAs are used to pay for qualified medical expenses.

HSA funds tin can be used tax-free^one to pay for qualified medical expenses. This includes not only medical emergencies, merely vision, dental and other out of pocket costs that are necessary for healthcare. Information technology's important to use your HSA for qualified medical expenses. Not following this rule volition outcome in the loss of revenue enhancement benefits that come from having an HSA, and result in tax penalties.

3. In retirement, your HSA spending becomes more flexible.

If HSA funds are used on a non-qualified medical expense, the buy is field of study to tax with an additional xx% penalty.² Depending on the buy, that can exist a meaning amount. The simply exception is if the accountholder is age 65 or older. At that time, HSA funds can be used for any purchase and only subject to regular income tax on that corporeality (with no penalty). Qualified medical expenses are still taxation-complimentary.¹

Additional tips when spending HSA funds:

HSA accountholder can exist reimbursed. If an HSA accountholder pays for qualified medical expenses out-of-pocket, those funds can exist reimbursed from the HSA. This reimbursement tin can happen days, weeks, months or even years after the qualified medical expense was made. It is important to continue the receipts to prove that the payment was indeed for a qualified medical expense in case of an audit.

HSA spending may be subject to IRS audit. Even if HSA funds were used for qualified medical expenses, the IRS may ask for proof that the funds were spent correctly. Considering of this, it is a adept idea to save receipts and go along conscientious records of how HSA funds are spent. HealthEquity allows accountholders to easily and efficiently upload receipts to their account using the app or member portal.

Conclusion

HSAs are a beneficial tool that allow accountholders to pay for sure medical expenses revenue enhancement-gratuitous.¹ Every bit long every bit accountholders follow the rules when it comes to spending their HSA funds, they tin accept advantage of the swell tax benefits that come up from this savings account.

¹HSAs are never taxed at a federal income tax level when used accordingly for qualified medical expenses. Besides, most states recognize HSA funds as tax-costless with very few exceptions. Delight consult a tax advisor regarding your state'south specific rules.

ⁱⁱInformation technology is the member'southward responsibility to ensure they meet HSA eligibility requirements as well as if they are eligible for the plan and expenses submitted. I should consult a tax counselor as individual factors and situations vary. HealthEquity does not provide legal, revenue enhancement, financial or medical advice.

Zilch in this communication is intended as legal, tax, financial, or medical advice. E'er consult a professional person when making life-changing decisions.

Topics: HSA, HSA questions, HSA fees, HSA spending

Source: https://blog.healthequity.com/three-things-you-should-know-about-hsas-part3

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