How Health Savings Account Reimbursement Works

A Health Savings Account (HSA) provides a tax-advantaged way to pay for medical costs. One method for using these funds is reimbursement, which involves paying for an eligible expense out-of-pocket and then paying yourself back from the HSA. This process allows you to access the account’s tax benefits even if you don’t use an HSA debit card at the point of sale. Understanding the rules for reimbursement is part of managing your healthcare spending while maintaining compliance with federal tax regulations.

Identifying Qualified Medical Expenses

The ability to reimburse yourself from an HSA is limited to “qualified medical expenses” (QMEs) as defined by the Internal Revenue Service. These are the costs associated with the diagnosis, cure, mitigation, treatment, or prevention of disease. Only expenses incurred after you have established your HSA are eligible for reimbursement. However, a legislative proposal could allow expenses incurred up to 60 days before an HSA is established to become eligible for tax years after December 31, 2025, provided the account is opened shortly after starting a high-deductible health plan.

Common examples of QMEs include payments for doctor visits, hospital services, dental treatments, vision care, and prescription medications. The definition extends to services such as acupuncture, chiropractic adjustments, and costs for stop-smoking programs. The CARES Act expanded the list of QMEs to permanently include over-the-counter medications without a prescription, as well as menstrual care products.

Expenses for general health or wellness are not considered qualified. This means you cannot reimburse yourself for items like non-prescribed vitamins or cosmetic surgery that is not medically necessary. While gym memberships currently fall into this category, proposed legislation could allow for the reimbursement of “qualified sports and fitness expenses” up to $500 per year for individuals and $1,000 for families, for tax years after December 31, 2025. For a comprehensive list of QMEs, the IRS provides detailed guidance in Publication 502.

Required Documentation for Reimbursement

Before you reimburse yourself, you must gather documentation that proves the transaction was for a qualified medical expense. The burden of proof rests with you, the account holder, not your HSA administrator. In the event of an IRS audit, these records will be your defense against potential taxes and penalties.

An itemized receipt or statement from the service provider is the primary document. It must show the date of service, the provider’s name, a description of the service or product, and the amount charged. A credit card slip or bank statement is insufficient on its own because it only shows the payment date and amount, omitting details about the purchase.

If the expense was processed through your health insurance, you should also keep the Explanation of Benefits (EOB) statement. The EOB provides a breakdown of what your insurance plan covered and what portion of the bill is your responsibility. Keeping both the provider’s itemized receipt and the corresponding EOB creates a complete record of the expense.

The Reimbursement Process

HSA administrators offer several methods to pay yourself back from your account. There is no time limit for seeking reimbursement; you can take a distribution for a qualified expense months or even years after you paid for it, as long as the expense was incurred after your HSA was established.

A common method is an electronic funds transfer (EFT) from your HSA to a personal bank account. This is done through your HSA provider’s online portal by entering the expense details and the amount to transfer. This process is the quickest, with funds arriving in your linked bank account within a few business days.

Some HSA administrators provide a checkbook linked to the HSA, allowing you to write a check to yourself. Another option may involve filling out a reimbursement request form to submit to the administrator. Regardless of the method, you are not required to submit receipts to the HSA provider at the time of reimbursement.

Record-Keeping for Tax Purposes

Long-term record-keeping is necessary for tax compliance. While distributions for qualified medical expenses are tax-free, you must be able to prove it if the IRS questions the transaction. This documentation is also needed to complete and file IRS Form 8889 with your annual tax return.

You should keep all documentation gathered to justify the reimbursement, including itemized receipts and any EOBs. It is also wise to keep a record of the HSA withdrawal itself, such as a bank statement showing the transfer or a copy of the cashed check.

The recommendation is to keep these records for at least three years from the date you file your tax return for the year in which the distribution occurred, as this is the window for an IRS audit. However, some experts suggest keeping records for as long as the HSA is open, since there is no time limit on when you can reimburse yourself. For example, if you reimburse yourself in 2025 for an expense from 2020, you would need the 2020 receipt to prove the validity of the 2025 distribution.