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

Is the Stock Market a House of Cards?
investing

Is the Stock Market a House of Cards?

The stock market volatility we’ve been experiencing and the apparent disconnect with the broader economy have some investors wondering just that. But …
October 12, 2020
Stock Market Holidays in 2020
Markets

Stock Market Holidays in 2020

Is the stock market open today? Take a look at which days the NYSE, Nasdaq and bond markets take off in 2020.
October 12, 2020
10 Worst Things to Keep in Your Wallet
Scams

10 Worst Things to Keep in Your Wallet

Storing your passport book or card, a spare key, or any of these other important items in your wallet leaves you open to identity theft -- or worse.
October 9, 2020

Recommended

Caught in the Middle: How Young Parents Can Plan for Long-term Care
long term care

Caught in the Middle: How Young Parents Can Plan for Long-term Care

One family’s story shows how important long-term care plans are … and how whole life insurance with a long-term care rider can help.
October 29, 2020
Insurers Cut Telehealth Benefits
Healthy Living on a Budget

Insurers Cut Telehealth Benefits

UnitedHealthGroup and Anthem customers were set to face out-of-pocket charges on certain telehealth visits starting October 1.
October 19, 2020
7 Things Medicare Doesn’t Cover
Healthy Living on a Budget

7 Things Medicare Doesn’t Cover

Medicare Part A and Part B leave some pretty significant gaps in your health-care coverage. Here's a closer look at what isn't covered by Medicare.
October 1, 2020
11 Costly Medicare Mistakes You Should Avoid Making
Medicare

11 Costly Medicare Mistakes You Should Avoid Making

If you don't make the right choices to fill in the health coverage gaps, you could end up with high Medicare premiums and big out-of-pocket costs.
October 1, 2020