Paying for care using an HSA

When you have an HSA, you decide when to use it to pay yourself back for the money you spend on health care. Many banks give you a debit card to pay for medical expenses using your HSA account.

Here's what happens if you're just starting up your HSA on January 1.

Date Event Total paid out-of-pocket HSA
balance
Family
deductible
balance
Jan.
1
Year begins. Your employer funds your HSA with $500. You decide to contribute $150 to your HSA at the end of each month. $0 $500 $2,400
Jan.
2
Your child breaks a leg sledding. You show your Priority Health ID card at the ER. $0 $500 $2,400
Jan.
2
Pick up a $20 prescription at a drug store. Pay with your HSA debit card. (Ask for and get a generic drug; the brand-name version is $85.) $0 $480 $2,400
Jan.
10
The pharmacy bills Priority Health $0 for the prescription. We apply the $20 you paid to your deductible. $0 $480 $2,380
Jan.
10
The hospital bills you for the $500 ER visit, and copies Priority Health, so PH applies it to the deductible. $0 $480 $1,880
Jan.
15
You write the hospital a personal check, then mark the bill paid with the check number and date, and save it in your HSA "To be reimbursed" receipts folder. $500 $480 $1,880
Jan.
30
$150 pre-tax payroll deduction to your HSA, reducing your taxable income. $500 $630 $1,880
Feb.
10
You write yourself a check from your HSA account to reimburse yourself for the $500 hospital visit. You mark the ER invoice as "Reimbursed on 2/10/20XX." Save all your paid HSA receipts in a folder in case the IRS ever wants to see them. $0 $130 $1,880
Feb.
28
$150 pre-tax payroll deduction to HSA $0 $280 $1,880
Mar.
30
$150 pre-tax payroll deduction to HSA $0 $430 $1,880
Apr.
30
$150 pre-tax payroll deduction to HSA $0 $580 $1,880
May
30
$150 pre-tax payroll deduction to HSA $0 $630 $1,880
June
8
You get a physical. Preventive care is 100% covered. $0 $630 $1,880
June
30
$150 pre-tax payroll deduction to HSA $0 $780 $1,880
July
30
$150 pre-tax payroll deduction to HSA $0 $830 $1,880
Aug.
21
Your child gets a physical and shots. 100% covered. $0 $830 $1,880
Aug.
30
$150 pre-tax payroll deduction to HSA $0 $980 $1,880
Sep.
30
$150 pre-tax payroll deduction to HSA $0 $1,130 $1,880
Oct.
30
When your account totals more than $1,000, your bank begins to pay you a little interest on the balance. $0 $1,135 $1,880
Oct.
30
$150 pre-tax payroll deduction to HSA $0 $1,285 $1,880
Nov.
28
Doctor visit for your child, who has a bad cough. Just show your ID card. $0 $1,285 $1,880
Nov.
30
$150 pre-tax payroll deduction to HSA + $5 interest from bank $0 $1,440 $1,880
Dec.
10
Your doctor bills you $100 for the visit, copying Priority Health. PH applies that $100 to your deductible. $0 $1,440 $1,780
Dec.
12
You pay your doctor bill using an HSA bank account check. You mark the invoice "Paid from HSA" with the date and file it in your HSA paid receipts folder, in case the IRS ever wants to see it. $0 $1,340 $1,780
Dec.
31
$150 pre-tax payroll deduction to HSA + $5 interest from bank $0 $1,490 $1,780
Your bottom line
You reduced your taxable income by $1,800 ($150 X 12 months).
You spent: $1,800 on contributions to your HSA. $0 in other medical expenses.

You received:
$ 620 in paid medical care expenses, plus 2 physical exams
+ 1,490 in your HSA, available whenever you need it
= $2,110 (plus your tax savings).
$1,490 (resets each plan year)