Using a Health Savings Account to Pay Long-Term-Care Premiums

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Question: Can I take out money tax-free from my health savings account to pay my long-term-care insurance premiums? If so, how much is tax-free?

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Answer: Yes, you can use money from your HSA tax-free to pay your long-term-care insurance premiums, with the maximum annual tax-free amount based on your age.

If you’re 40 or younger, you can withdraw up to $420 tax-free from an HSA in 2019 to pay the premiums; if you’re age 41 to 50, you can take out $790; if you’re age 51 to 60, $1,580; if you’re age 61 to 70, $4,220; and if you’re age 71 or older, $5,270. If you and your spouse both have long-term-care policies, you can each use money tax-free from your HSA to pay premiums, up to the aged-based maximum for each of you (based on your ages by the end of the year). These limits increase slightly each year for inflation.

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To qualify, the long-term-care policy must cover only long-term-care services. And it must pay out if you need help with at least two activities of daily living or have cognitive impairment. Most traditional long-term-care insurance policies qualify. If you’re not sure, ask your insurer if your policy is “tax-qualified.”

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.