HSA to Roth IRA conversion
Hi,
Has the law changed, whereby it is now allowed to liquidate your HSA moving the balance to your Roth IRA as a conversion ?
If so, what are the steps to follow, to make this happen ?
Thank you
Phil
As noted, HSA distributions to cover medical expenses are not taxable. However, there is no time limit on reimbursing prior medical expenses not paid by HSA. So if you have documentation, you can pay yourself now for medical expenses 20 yrs ago. I believe the expenses can even be from before you had an HSA or HDHP and ANY medical expenses can be used with documentation.This may allow you to pay yourself enough that you can liquidate your HSA or at least enough of it to “live on”. Don’t have to do it all at once.
- “I believe the expenses can even be from before you had an HSA”
- That’s incorrect. Medical expenses eligible to be paid from the HSA are only those are only those incurred after the establishment of the HSA. (IRS Notice 2004-50, Q&A-39) The HSA is generally considered to be established on the date that the first contribution to the HSA is made.
Thanks for clarification but still in some cases this could literally be DECADES of prior medical expenses which could be claimed. Of course, it also means you need decades of documentation. We literally have a file box basically just for this.
I agree. I myself have such documentation for all unreimbursed medical expenses I have incurred since the establishment of my HSA. In my case, I just need to make sure to reimburse myself for these before I die. If I don’t, my non-spouse beneficiary of the HSA can only be reimbursed from the HSA for those medical expenses of mine incurred before my death that my beneficiary pays within one year after my death, not those that I paid before my death. The remainder of the HSA is taxable to my beneficiary.
DMx,In your 05/11/23 post you said “There is no option to move HSA balances to any other kind of account.” Is a transfer to a TIRA no longer an option? Thank you.
Transfer of an HSA to an IRA has never been an option. Perhaps you are thinking of an HSA funding distribution from an IRA to move IRA funds to an HSA.
Permalink Submitted by David Mertz on Thu, 2023-05-11 10:18
There is no option to move HSA balances to any other kind of account. Distributions from an HSA are taxable unless they are applied to qualified medical expenses. Taxable HSA distributions received before age 65 are subject to a 20% penalty.