HSA Expenses 5 years ago

Submitted by Vickie Intriago on Tue, 2023-06-27 03:21

Can a person withdraw from their HSA account 10 years from now even though the medical expense occurred 5 years earlier?
Client has been telling me that she is keeping good receipts and records for years and doesn’t plan to spend on her HSA until retirement. At retirement she will match up her medical expenses from years prior to her withdraws at retirement.

Does this make sense?



Submitted by William Tuttle on Tue, 2023-06-27 03:51

  • See IRS Notice 2004-50 Q&A 39.
  • 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. 


Submitted by David Carrell on Wed, 2023-06-28 22:33

  • Yes it makes perfect sense (and I would almost blanket recommend it if can afford it, especially for early retirees). 
  • Basically can use the expenses from “this year” 30 yrs from now. This will create tax free income 30 yrs from now. If the person has retired (no income) but had a large enough HSA balance and enough historical medical bills, he can ‘create’ a pay check (tax free) by reimbursing himself after the fact. 
  • The only limit on the timing I know is the expense must be from a date later than when the person’s HSA was first opened. The expense could even be from a year the person was not eligible for contributing to the HSA as long as the HSA exited prior to the expense.
  • This also allows those funds in the HSA to stay in the HSA and grow tax free.


Submitted by Sunil Veluvali on Wed, 2023-06-28 23:22

The burden of keeping medical records for 30 years is daunting. Wouldn’t inflation and portfolio growth make the expenses incurred decades back trivial?



Submitted by David Mertz on Thu, 2023-06-29 13:05

Provided that the HSA funds are eventually used for reimbursing medical expenses, delaying reimbursement from the HSA turns taxable growth outside the HSA into tax-free growth inside the HSA.  As long as there is positive growth, there are tax savings.



Submitted by William Tuttle on Thu, 2023-06-29 14:35

  • A taxpayer using an HSA account to pay or reimburse qualified medical expenses as they occur must still meet IRS proof requirements.
  • Proof of eligibility: Documentation of insurance enrollment. If married, both spouses even if one spouse doesn’t have HDHP (FSA/HRA?)
  • Proof of service: provider bill, insurance explanation of benefits (EOB), prescription, invoice, etc…
  • Proof of payment: receipt, copy of cancelled check, statement etc…
  • Proof no deduction taken: income tax returns.
  • The only difference between contemporaneous and deferred reimbursement is the length of retention. This is until the statute of limitations (SOL) of the year of reimbursement has expired (3+ years).
  • Much of the proof: bills, EOBs invoices, statements, etc… are already available in PDF form. It is easy enough to image the rest.
  • It was also easy to keep a history.

    • Bottom Line: You already have to retain proofs for a minimum of 3+ years. Keeping electronic records longer if far from daunting.



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