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.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
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.
-
Stock Market Today: Markets Waver as Inflation Continues to EaseStocks gave up early gains as waning consumer price inflation leaves rate-cut bets essentially unchanged.
-
October CPI Report Hits the Mark: What the Experts Are Saying About InflationCPI While the current pace of rising prices appears to have leveled off, the expected path of rate cuts has become less certain.
-
Long-Term Care: Other Coverage You Might ExploreLong-Term Care Insurance A third of applicants are rejected from buying long-term care insurance. Here are some smart alternatives.
-
Long-Term Care Insurance: Higher Premiums for Shrinking BenefitsLong-Term Care Insurance There's a 70% chance you'll need some type of long-term care. Getting the right insurance is more complex these days. Here's some guidance.
-
Short-Term Insurance Plans' Good, Bad and Uglyretirement You'll need a clear-eyed analysis to gauge the value of short-term care insurance plans and if they're right for you.
-
Retirees, This Is What It Takes to Be Your Own InsurerLong-Term Care Insurance The costs of long-term care are already exorbitant and will only get worse. Follow this guidance to get in front of the issue.
-
Plan Now for Long-Term CareLong-Term Care Insurance You could buy insurance to finance future costs, but policies are pricey. Here’s how to decide whether you need coverage.
-
A Woman’s Guide to Long-Term CareLong-Term Care Insurance Who needs long-term care insurance … and who might be able to do without it?
-
Long-Term Care Insurance: To Buy or Not to Buy?Long-Term Care Insurance Should you buy long-term care insurance or save up to self-insure? There are many trade-offs to consider. And, surprise: It doesn’t have to be one or the other.
-
You Can Keep Some Assets While Qualifying for Medicaid. Here's HowLong-Term Care Insurance There are some tools you can use to avoid spending down all of your assets, and potentially impoverishing a spouse, while still meeting the qualifications for Medicaid.
