By Eric Rosenberg, WCI Contributor

You can earn and invest tax-free when you use a Health Savings Account (HSA) to its full tax advantage. Ultra-savvy HSA owners know they can pile up expenses over the years and withdraw from the account during retirement (or early retirement). This makes the HSA perhaps the best account in the US when it comes to saving on taxes.

The trick is that you need a receipt to prove that every withdrawal from the account is for a qualified medical purpose. That’s easy when you reimburse yourself immediately, but what about if you want to reimburse yourself years or decades in the future? Here’s a look at the best way to track your HSA receipts.


How to Save on Taxes with an HSA

Before diving into the details on HSA receipts, here’s a quick primer on how they work and how they lower your tax bill.

A health savings account is an individual tax-advantaged account enabling you to earn and withdraw from the account tax-free, including capital gains. That’s better than you can get with any type of retirement account and likely anywhere else. It's basically a triple-tax-free vehicle.

To use an HSA, you must have a qualifying High Deductible Health Plan for your health insurance. Then, you can contribute up to an annual limit based on your household size (in 2022, the annual limit is $3,850 for a single person and $7,750 for a family). Contributions are tax-free, as we said above. Depending on your HSA, you might have options to invest in ETFs, mutual funds, stocks, and other available investment assets.

All accounts’ gains are tax-free, but you’re only allowed to withdraw them tax-free for qualifying medical expenses. Receipts from a doctor’s appointment, hospital visit, medical testing, prescription medication, and doctor-prescribed medical devices are among the approved withdrawals for tax reasons.

More information here:

7 Reasons an HSA Should Be Your Favorite Investing Account


The Best Way to Track Your HSA Receipts

Depending on your family’s health and finances, you may have very few medical costs annually or a seemingly massive pile of monthly receipts. Here are some of the best methods to keep track of those medical expenses using a centralized repository.


Using HSA Account Tracking Tools

Some HSA accounts understand that you want to track expenses for long-term use. To help, they include features where you can enter and track medical costs over time and reimburse yourself later.

The biggest benefit of this method is that it’s designed exactly for what we’re trying to do. You can enter receipts using your account’s website or app and add to a growing balance of medical costs available for reimbursement. If you find yourself short on cash in the future, you’re technically allowed to withdraw for any past medical expense at any time. With that list of past unreimbursed expenses, you can use your HSA as an emergency fund or hold on until well into retirement to get the best tax advantage.



If you’re unsure that you will stick with the same HSA provider for the long haul, you may want to keep your data outside your HSA account. There’s no rule saying you can’t keep track of your expenses using a simple spreadsheet—or even a pen and paper. Those are certainly suitable choices if you love Microsoft Excel or you're fond of Google Sheets.

A spreadsheet gives you more flexibility to design your own system to track past medical expenses for reimbursement. You can add columns to track by the provider, expense type, date, and other helpful information. Of course, you’ll need to enter the expense amount and be sure you don’t forget to add every receipt, so your data is always updated.


Budgeting Software

Budgeting apps like Mint, Personal Capital, YNAB, and Lunch Money include features to label and sort transactions using categories or tags. If you can accurately tag every HSA-eligible purchase, your software can help automatically keep track of reimbursements for you.

The trick here is knowing what’s for the HSA and what isn’t. If you do other shopping at the drug store or buy a mix of over-the-counter and prescription products, your reimbursement tracking may get muddied. That would make accurate withdrawals in the future extremely difficult, if not impossible, to keep track of. The budgeting software method can work, but it takes some maintenance from you to ensure it stays on track for your needs.

tracking hsa receipts


Save Digital and Hard Copy Receipts

Depending on what you’re doing, you’ll want to keep most bank statements and tax filings for at least seven years. After that much time has passed, you’ll unlikely need to go back into that information for any reason other than your own curiosity.

But for HSA receipts, you may wind up reimbursing yourself 20, 30, or 40 years from now. When that’s the case, you should also plan to keep your receipts. For physical receipts, you can scan them into your computer or use a new folder for each year’s receipts to keep them somewhere safe. Remember, ink fades over time so you really do need to digitize these.

You can use any storage and filing system you like for digital receipts. Be sure to spend the time to set a backup, so you don’t accidentally lose your receipt archive in a hard drive crash or other accident.

More information here:

The Best Ways to Use an HSA


Bottom Line on HSA Receipts

There are few topics in personal finance as unexciting as where to save your receipts. But if you find it exciting to save a bundle on your taxes, tracking those receipts is a necessary part of the game. When you find a simple and easy system to follow for your HSA receipts, it’s easy and quick to enter and track every qualifying medical expense.

With that system implemented, you’re on track for the best tax savings legally available to anyone in the US.


If you need help with tax preparation or you’re looking for tips on the best tax strategies, hire a WCI-vetted professional to help you figure it out.


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