How to Use Your HSA Tax-Free for Anything!
Hey, guys Mike Frontera here with Retirement Theory, and today I'm going to give you a little tidbit about the HSA, otherwise known as the Health Savings Account. One of my favorite kinds of accounts! And, in fact, if you haven't seen it, let me point you to my blog from November of 2020 called, “Should I fund an HSA?”
So just a little bit of background. If you fund an HSA, basically your contributions, the money that you put in, go in pre-tax so you get a deduction when the money goes in. All right, and you can put in $3,600 a year this year, 2020, $7,200 if you are if you have a family plan, and an extra $1,000 if you're 55 or older. Now, when you go to pull money out, you can take that money out of the HSA and put it toward your health expenses tax free, as long as they are qualified expenses. Those expenses do not have to occur in the same year that you use the HSA.
Okay, so what does that mean? If you have medical expenses, qualified health expenses, and you pay for those expenses out-of-pocket, the HSA can reimburse you for the money that you spent on those expenses at any time. All right, so what I mean is: let's just say you spent $2,000 over the course of a year in qualified medical expenses and you funded your HSA in full. If you use your $2,000 out of your own pocket, you didn't use the HAS, it was money out of your own pocket to cover those expenses and you hung onto the receipts for those medical expenses you could reimburse yourself tax-free out of the HSA at any time. As long as I can match it up to those receipts for those health expenses along the way, the HSA can be used really like another retirement account. It’s an extra special cool retirement account, like a regular IRA you got a deduction going in but like a Roth IRA you get a tax-free on the way out. Okay, all you have to do is you have to make sure that you can match it up to health expenses that are either present or anytime in the past. There is no limit on the amount of time that has gone by between the time you incur that medical expense and when you're going to reimburse yourself from the HSA.