Every year you receive a pile of invoices from primary care doctors, specialists, insurance companies, and imaging facilities. Have you ever wondered how long you should keep medical bills?
At a minimum, you’ll want to hold onto medical bills for one to three years after you pay them, but if you have a health savings account (HSA), hold onto them indefinitely.
Why would you need to hold on to medical bills for that long? Let’s dive into the reasons.
Keeping Medical Bills In Case of Insurance or Provider Disputes
It’s wise to keep your medical bills for a minimum of one year after submitting payment. Write down the date you paid and whether you used a check, credit card, or cash. If you are worried about a dispute, keep copies of associated canceled checks with your bills.
You can also print out copies of your credit card or bank statements. Make a record of the due date and the date of payment.
If your insurance company or provider tries to dispute your payment, you’ll have evidence on hand to refute them.
Keeping Medical Bills Until You File for a Tax Deduction
If you plan to deduct your medical expenses at tax time, you’ll need to keep your medical bills for three years.
How do you know if you are qualified for a medical expense deduction? First, your medical bills must exceed 7.5% of your adjusted gross income (AGI).
Let’s take an example. If your adjusted gross income is $40,000 a year, you could only deduct unreimbursed medical expenses above $3,000. ($40,000 x 0.075). The first $3,000 won’t count.
Most people reach this number in one of two ways. They either experience a severe illness or fall into a low tax bracket. Part-time workers, retirees, and financially independent individuals often have low enough incomes to take advantage of this tax rule.
Keep track of your medical bills beginning on January 1st through December 31st. Then add up the total, and determine if you’ve spent more than 7.5% of your AGI.
What Counts as a Qualified Medical Expense?
When we think about medical payments, we tend to think about fees paid to doctors, dentists, surgeons, or psychiatrists, but remember to hold on to receipts for all qualified expenses, not just those sent to your insurance company.
Examples include payment to nontraditional medical practitioners, hearing aids, crutches, weight-loss programs for specific diseases, acupuncture treatments, breast pumps, and so much more.
Keeping track of your costs doesn’t need to be a lengthy process. Simply add up your receipts as you receive them or all at once at the end of the year.
If you file a claim for a credit or refund, please keep records and medical-related documentation for three years from the date you file the original tax return.
Please note some tax advisors suggest keeping tax records for seven years. If you plan to hold on to your filings for that long, go ahead and keep your medical records too.
For tax purposes, you’ll want to keep all of your medical bills in a folder with other income tax-related documentation for that year.
You will need to itemize your deductions using Schedule A to take advantage of this rule.
Keeping Medical Bills Until You Request Medical Reimbursement
So now you know why you might want to keep your medical bills for one to three years, but why would you want to keep them indefinitely?
This scenario is specific to those individuals who’ve established a Health Savings Account (HSA). Have you ever signed up for a High Deductible Health Plan (HDHL) associated with an HSA? If you have, you’ll want to keep your medical bills until you receive reimbursement for them.
Reimbursement occurs when you pay your medical bills with after-tax dollars but then pay yourself back with the money saved in your HSA.
Let’s dig into the details to learn more.
What is a Health Savings Account (HSA)?
A health savings account is a particular account that allows you to set aside pre-tax money to pay for qualified medical expenses. If you have a high deductible insurance plan sponsored by your employer, you typically contribute to your HSA account every payday.
If you signed up through the open market, you can contribute to your HSA as often as you’d like, but in 2022, individuals can contribute a yearly maximum of $3,650. Those with family plans can contribute up to $7,300.
Health savings accounts allow you to stash your cash with pre-tax dollars. That means Uncle Sam won’t tax this money before you save it. It won’t be taxed while it sits in your account, and if you use the money to pay for medical expenses, you won’t be taxed when you withdraw it either.
Health savings accounts are the trifecta of tax-sheltered savings. Imagine stashing cash without ever paying tax on it. When used correctly, you won’t pay income tax or capital gains tax!
By using untaxed dollars, you lower your overall health care costs. Best of all, if you don’t need the money to pay your bills, you can continue to let it grow!
Asking for Immediate Reimbursement
Most people with access to an HSA either pay their bills using the debit card associated with their health savings account or ask for immediate reimbursement.
But did you know that you can wait years before paying yourself back? That’s why you want to keep your medical bills indefinitely.
You can request reimbursement days, months, or years into the future.
Keeping Medical Bills Indefinitely
If you have access to an HSA, you can reimburse yourself at any time, which means you can request a reimbursement right now or fifty years from now.
Write down the date you opened your HSA account and keep track of every single medical expense incurred after that date.
You cannot receive payback for medical treatment that occurred before opening your HSA. You can, however, receive reimbursement for any time after that date.
Keep Your Medical Bills For Future Reimbursement
Let’s take an example. On January 1, 2022, you signed up for a high deductible health plan with your employer and established a health savings account on that same day.
Since you just opened the account, the balance begins at $0. Unfortunately, you trip on the way to work and injure yourself, requiring a trip to the emergency room.
A few weeks later, you receive a bill from the hospital. You don’t have money in your HSA yet, so you write a check or use your credit card.
Now flash forward a few months into the future. After several payday contributions, your health savings account balance is $1000.
If you need money, you can now reimburse yourself. In other words, you can pay yourself back by requesting medical reimbursement from your HSA. But to do that, you’ll need that medical bill from your emergency room visit.
If you’ve established an HSA account, you should keep your medical bills until you reimburse yourself. If you haven’t reimbursed yourself yet, you should keep them indefinitely.
Keep Your Medical Bills Until You Request Reimbursement
Keep in mind there isn’t a time limit to request reimbursement. In this example, as long as your medical expense occurs after January 1, 2022, you can pay yourself back from your HSA.
Any date on or after you establish your HSA counts, so in this example, you can pay yourself back for a medical expense that occurs on January 1, 2022, or December 31, 2050.
Any qualified medical expense that occurs after your HSA is opened is eligible for reimbursement at any time, even if that date is thirty, forty, fifty, or more years into the future! That’s why you can invest the money in your HSA and then reimburse yourself at any point in the future.
The medical treatment date doesn’t matter as long as it occurs after establishing your HSA. In other words, you can’t reimburse yourself if you fell and injured yourself on December 31, 2021, or any day before that. The qualifying expense must occur on or after the day you opened your HSA.
To Use HSA Reimbursement, You Don’t Have to Be Eligible to Contribute to an HSA
Here’s another lesser-known fact. You don’t have to be eligible to contribute to an HSA account when requesting reimbursement. The funds inside your HSA are yours to use anytime in the future.
Let’s take another example.
From 2015 to 2021, you sign up for a high deductible health plan from your employer and contribute the maximum amount to your HSA.
Then, in 2022 you switch jobs and sign up for a PPO plan instead. Although you can no longer contribute to your health savings account, you can still withdraw from it.
You can use medical bills from 2022 or statements from 2015 through 2021. Because your account opened in 2015, all medical treatments that occurred after that date are eligible.
It doesn’t matter that you aren’t using a high deductible plan anymore. The key is to hold on to your medical bills and other financial documents for future use.
If you have enough money to pay your medical bills, you can allow your HSA money to grow until you retire! Then you can use all of those old receipts to drain down your account.
Keep Receipts for all HSA-Eligible Expenses
When we think of HSA-eligible medical expenses, we think about doctor or dentist visits, but eligible expenses include all sorts of over-the-counter products too.
Thanks to the CARES Act, over 20,000 new products became eligible for HSA reimbursement, including over-the-counter pain medicine, cold and flu products, menstrual products, and heartburn medications.
That means you should now save medical bills and receipts related to sinus medicine, digestive aids, laxatives, baby rash ointments, sleep aids, chapsticks, nasal wash systems, breathing strips, acne medications, and so much more.
This expanded list of eligible expenses became a permanent change starting on January 1, 2020. If you purchased any of these items after that date and after the time you established an HSA, you can file for reimbursement.
Long-term-care premiums may also be eligible for HSA reimbursement. You will need to read over the fine print of your insurance policies to determine if they qualify. Keep them in a folder with your other medical bills if they do.
How to Store Medical Bills?
Some people like to retain paper copies of bills, while others prefer digital formats. If you’re a financial minimalist, the idea of keeping piles of paperwork around might drive you crazy.
The key is to choose a format that works for you. There is nothing wrong with using an old-fashioned filing cabinet to store the hard copy of your medical bills, but if you prefer to keep them in GoogleDrive or Dropbox, that’s fine too.
Buy a scanner and shredder if you want to stick with digital copies. Scan each document and shred the hard copy. Then back up your data. If you lose your medical bills, you can’t seek reimbursement for them.
If you prefer paper copies and you’re worried about someone snooping through your medical paperwork, you can keep them in a fireproof safe or in a filing cabinet that requires a security code or key.
Put them inside the box next to other important documents like your social security cards and birth certificates.
Figure out a way to store your bills, so they are easy to access. You may want to organize them by dollar amounts, placing the most expensive bills at the top. You can also sort them chronologically.
I prefer to place big bills in the front of the binder. Anything over $250 goes in one folder, and the rest are saved in folders by date. I create a folder each year and dump the bills in as I receive them.
You can also create a running spreadsheet of expenses. That way, you can seek reimbursement for the big bills, think Invisalign and emergency room visits, rather than making one hundred tiny requests for co-pays and bandages.
Whatever method you choose, make it a good one. You might not retrieve these bills for a couple of decades!
After requesting payback, you can shred the bill if you’ve kept it in paper format or delete it. Don’t throw away the paperwork. At a minimum, rip it up before placing it in the trash.
How Long Should I Keep Medical Records?
This article focused on keeping and storing medical bills, but I don’t want to end without talking about the importance of medical records.
Keeping detailed medical records could save your life, so make sure to keep an updated medical log as well as pertinent information about your medical history, medications, and allergies. Just keep them in a separate place where you can easily share them.
Insurance companies and banks care about your accounts, while doctors and other medical professionals care about your medical history.
There is no need to mix the two.
How Long Should You Keep Medical Bills?
How long should you keep medical bills? From one year to indefinitely! If you plan to deduct medical expenses at tax time, save your paperwork for at least one year. After filing your taxes, you’ll want to keep them for another three.
If you’ve opened a Health Savings Account (HSA), save them until you request reimbursement, which might be indefinitely.
Make sure you keep your medical bills in a safe place where you can easily access them. It might be another few decades before you use them for reimbursement.