Paying Long-Term-Care Premiums With HSA Money

The amount you can withdraw from a health savings account tax-free to pay premiums depends on your age.

Can I use money from my health savings account tax-free to pay long-term-care premiums?

Yes. If you have a “tax-qualified” long-term-care policy, you can use money from your HSA tax-free to pay a portion of the premiums. A long-term-care policy is tax-qualified if it pays 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. Most long-term-care policies qualify.

The amount you can withdraw tax-free for premiums depends on your age. In 2014, you can use up to $370 tax-free from your HSA for long-term-care premiums if you’re 40 or younger, $700 if you’re 41 to 50, $1,400 if you’re 51 to 60, $3,720 if you’re 61 to 70, and $4,660 if you’re over 70. Those amounts increase slightly each year to account for inflation.

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You can also use HSA money tax-free for Medicare Part B and Part D premiums and Medicare Advantage (but not medigap) premiums. See FAQs About Health Savings Accounts for more information about eligible expenses.

For more information about long-term-care insurance, see Options for Covering Long-Term-Care Costs.

Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

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.