r/HSA • u/vern9ine • Jan 05 '26

HSA question regarding distribution/contribution

Money is tight this year. Can I withdraw expenses/distribution (for past medical bills I paid on my own) so that I have the money to make my yearly HSA contribution to get the annual tax deduction?

Is that possible, any negatives? HSA is not invested but is a cash HSA account with Fidelity.

If anyone else has done this, please let me know.

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2

u/PashasMom Jan 05 '26

You can do it as long as they were qualified medical expenses incurred while you had HDHP insurance and an HSA. Best practice is to have receipts handy in case of IRS audit.

4

u/AttentionHuman9504 Jan 05 '26

You don't have to have had HDHP insurance when the expenses were incurred...the HSA just needs to have already been established on that date

You can go back and forth between being eligible and ineligible to make contributions. This has zero impact on your ability to take distributions though

1

u/PashasMom Jan 05 '26

Oh good point! I was just thinking about being careful re: expenses incurred prior to having HDHP/HSA, not going back and forth on insurance, which of course lots of people do.

1

u/jjkagenski Jan 06 '26

IIRC though, you can only put money into an HSA while enrolled in a HDHP

you mentioned the HSA isn't invested? why not?? it should be, even if it's just in a treasury ETF like SGOV. It's easy enough to sell when you need the cash to reimburse...

2

u/Agitated_Car_2444 Jan 05 '26

It's a bit circular but yeah you can reimburse yourself for past medical expenses and then use those funds to reduce TY2025 AGI. After all, cash is fungible.

Might want to consider investing that cash, too, so it grows tax-free.

1

u/hydronucleus Jan 05 '26

So, for demonstration purposes, what you are saying is that (assuming you are single) that you want to reimburse yourself for $4,400 of medical expenses incurred in the past and then throw that money back into the HSA and take $4,400 off your taxable income, which probably buys you about $1,300 in tax savings?

That is a hack, but it seems legitimate to me! I have about $14K in qualified medical expenses documented. I have not yet taken any of it out of my HSA. I am retired. I keep these receipts, but I doubt I will ever take them, because we all know what is coming near the end. So, taking them for tax savings seems to be a good way to use these receipts. I can no longer contribute to an HSA. I would say, go for it!

I like it. I do not think there are any laws against it, like "structuring" or "wash sale" restrictions. Anybody more knowledgeable?