3 Different Ways To Use Your HSA For Medical Bills

July 26, 2018

Are you trying to pay off medical bills? Did you have an HSA-qualified health insurance plan when you incurred the medical expenses? If you answered yes to both of those questions, there are a few ways that an HSA can help save you money:

When you have a balance in your account: just pay the bills

This one is the most obvious. After all, that’s what it’s there for, right? On the other hand, even if you have money in your HSA, you may not want to use it if you have other savings you can use. That’s because your HSA money can be invested and be used tax-free for future health care expenses or penalty-free for any purpose after age 65. Why take money out of an account that’s growing to be potentially tax-free when you can take it out of a taxable account?

If you don’t have a balance: get an immediate tax deduction

Even if you don’t have anything in your HSA, it can still give you a nice tax break. That’s because you can take the money you plan to use to pay the medical bills (whether from other savings or a loan) and first contribute it to your HSA to get a tax deduction and then withdraw it from the HSA tax-free for qualified medical expenses. If you’re in the 24% tax bracket, that’s like getting a 24% discount on those expenses! (this assumes that you haven’t already deposited the maximum amount for the year)

If you can’t make a deposit before paying: pay yourself back with tax-free dollars

If you neglected to contribute the money to your HSA before paying the medical bill, no worries, you can still get the tax break. That’s because you can withdraw the money tax-free for qualified expenses at any time, even after you’ve paid them. It doesn’t even have to be in the same year you had the expense or paid the bill, as long as you were eligible for the HSA at the time the expense was incurred. For example, you can have an expense in 2018, pay the bill off in 2019, and reimburse yourself tax-free in 2024 after you’ve had time to contribute to it. (more about this in Rynda’s post)

No one likes paying medical bills. (Talk about adding insult to injury after an illness or…injury.) If you have an HSA, you can at least make them slightly less taxing though.