Married Couples, Pay for Long-Term-Care, HSA Funds

I read your column about paying long-term-care premiums with HSA money. But I wonder how it works for a married couple when one spouse has an HSA and the other does not. Can the HSA money be used tax-free to pay both spouses’ premiums?

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Yes. If you have an individual health insurance policy, rather than a family plan, and a health savings account, you can still use money tax-free from the HSA for both spouses’ eligible long-term-care premiums and other medical expenses.

“The rules for putting money into an HSA are completely different from the rules for taking money out of an HSA,” says Todd Berkley, president of HSA Consulting Services, which runs www.AskMrHSA.com. The amount of money you can contribute to an HSA each year is based on whether you have an individual health insurance policy or family plan. But the type of policy you have no longer matters when you withdraw money from the HSA.

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You can use money in the individual HSA for eligible medical expenses for yourself, your spouse and your current tax dependents. Note that Medicare premiums can be paid only from an account whose owner is 65 or older, says Berkley.

The amount you can withdraw tax-free from the HSA for long-term-care expenses is based on the age of the person for whom the premiums are paid (the limits apply for each person, not per couple). If you’re 40 or younger by the end of the year, you can withdraw up to $380 in 2015; if you’re 41 to 50, you can withdraw up to $710; $1,430 if you’re 51 to 60; $3,800 if you’re 61 to 70; and $4,750 if you’re 71 or older. Your spouse can withdraw up to those limits, too. The long-term-care policy must be “tax-qualified” to be eligible, which includes long-term-care policies that pay benefits when you’re unable to perform at least two activities of daily living (such as bathing and dressing) or when you have severe cognitive impairment.

For more information about HSA-eligible expenses and rules, see FAQs About Health Savings Accounts. Also see IRS Publication 969 Health Savings Accounts.

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.