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A STRATEGY TO BUILD UP MORE TAX-FREE MONEY A quirk of the HSA rules gives you an unlimited amount of time to withdraw money tax free for any eligible expenses you incurred since you opened

the account. If you use other cash for those expenses at the time, you can leave the money growing in the HSA for the future and then withdraw it tax free anytime. “It’s always best to leave

your funds to grow tax free and reimburse yourself later. And it’s even better if you are investing your funds in the meantime,” says Roy Ramthun, president of HSA Consulting Services. If

you plan to keep money growing in the account, make sure your investments match your time frame. Most HSAs let you invest in a portfolio of mutual funds for long-term growth, in addition to

offering a savings account for short-term expenses. Keep records of all HSA-eligible expenses you paid out of pocket through the years. You can look up eligible expenses in IRS Publication

502 Medical and Dental Expenses. Additionally, over-the-counter drugs and menstrual products are eligible for tax-free HSA withdrawals but are not tax-deductible medical expenses. You can

also make tax-free HSA withdrawals to pay your health insurance premiums if you lose your job and are receiving unemployment benefits or if you continue your employer’s coverage on COBRA, a

federal law that requires companies with 20 or more employees to let you keep your coverage for up to 18 months after you leave your job. You usually have to pay both the employer’s and the

employee’s share of the premiums on COBRA. Steven Hamilton, an enrolled agent in Grayslake, Illinois, who is authorized to represent taxpayers in front of the IRS, recommends holding on to

receipts of the eligible expenses and the explanation of benefits from your insurance company, as well as records showing that you didn’t deduct the expenses on your income tax return or

withdraw the money for those costs from your HSA. IRS Form 8889 reports HSA distributions each year. Some HSA administrators, such as Fidelity, provide tools that make it easy to keep track

of your eligible expenses and if you paid for them with money from the HSA. If most of your savings is in tax-deferred accounts such as traditional IRAs and 401(k)s, being able to withdraw

money tax free from your HSA, like your Roth IRA, can help you use both types of accounts to lessen your tax bill. The money you withdraw from an HSA for qualified medical expenses isn’t

included in the income calculations that determine whether you’re subject to the Medicare high-income surcharge or if you have to pay taxes on your Social Security benefits. _This story,

originally published June 16, 2020, was updated with 2023 information._ _Kimberly Lankford is a contributing writer who covers personal finance and Medicare. She previously wrote for 

_Kiplinger’s Personal Finance _magazine, and her articles have also appeared in _U.S. News & World Report, The Washington Post _and the _Boston Globe_. She received the personal finance

Best in Business award from the Society of American Business Editors and Writers._