Long-Term Care Insurance

Using a Health Savings Account to Pay for Long-Term-Care Insurance

You can tap an HSA to pay for long-term-care insurance, but the amount you can withdraw tax-free depends on your age.

Question: Can I withdraw money tax-free from my health savings account to pay my long-term-care insurance premiums? If I can, is there a limit to the amount I can use? Does it have to be for a stand-alone long-term-care policy, or can it be for a life insurance policy with long-term-care benefits, too?

Answer: You can use HSA money to pay premiums for an eligible long-term-care insurance policy, but the amount you can withdraw tax-free each year is based on your age at the end of the year. The older you are, the more you can withdraw tax-free. The amount increases slightly every year, and the limits are per person. In 2018, people who are 40 or younger can withdraw up to $420 tax-free from an HSA to pay their long-term-care premiums. People age 41 to 50 can withdraw $780, those age 51 to 60 can withdraw $1,560, those age 61 to 70 can withdraw $4,160, and if you’re 71 or older you can withdraw $5,200.

To qualify for the tax-free HSA withdrawals or the tax deduction for long-term-care insurance premiums (see below), the policy must be a "qualified long-term-care insurance contract," which includes most stand-alone long-term-care policies currently on the market. Ask your insurer if your policy is eligible. Life insurance policies that can also provide a long-term-care benefit don’t qualify.

If you don't have an HSA or you don't use HSA money for these expenses, your long-term-care insurance premiums may be tax-deductible up to the same limits listed above. To qualify for the medical-expense deduction in 2018, you must itemize, and your eligible medical expenses are deductible only to the extent that they exceed 7.5% of your adjusted gross income. Your state may offer an additional break from your state income taxes for qualified long-term-care insurance premiums.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
Can't Sleep at Night? Consider Getting Checked Out By a Doctor
health insurance

Can't Sleep at Night? Consider Getting Checked Out By a Doctor

Older adults are more likely to suffer from sleep disorders, such as insomnia and sleep apnea. Left untreated these conditions can have dire consequen…
May 26, 2021
Midyear Investing Outlook: Where to Invest Now
Kiplinger's Investing Outlook

Midyear Investing Outlook: Where to Invest Now

After a powerful start, stocks will grind higher in the second half of 2021. But watch out for curveballs.
May 23, 2021

Recommended

Can't Sleep at Night? Consider Getting Checked Out By a Doctor
health insurance

Can't Sleep at Night? Consider Getting Checked Out By a Doctor

Older adults are more likely to suffer from sleep disorders, such as insomnia and sleep apnea. Left untreated these conditions can have dire consequen…
May 26, 2021
You Can Keep Some Assets While Qualifying for Medicaid. Here's How
Long-Term Care Insurance

You Can Keep Some Assets While Qualifying for Medicaid. Here's How

There are some tools you can use to avoid spending down all of your assets, and potentially impoverishing a spouse, while still meeting the qualificat…
May 24, 2021
High-Deductible Health Plans: Don’t Let the Name Scare You Off
health insurance

High-Deductible Health Plans: Don’t Let the Name Scare You Off

Some people are biased against high-deductible health insurance plans — just because of the name. It’s unfortunate, because for most people an HDHP ca…
May 21, 2021
Stimulus Plan Has Health Insurance Benefits, Too
Coronavirus and Your Money

Stimulus Plan Has Health Insurance Benefits, Too

The plan’s health care provisions could deliver big savings for early retirees and laid-off workers.
April 29, 2021