Critter Corner: Can I Use a Health Savings Account to Pay for Long-Term-Care Insurance or a Hybrid Life Insurance Policy?

Dear Angel,

I have a Health Savings Account through my work. 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?


Elle Teesee

Dear Elle,

Yes, you can use Health Savings Account (HSA) money to pay premiums for an eligible long-term-care (LTC) insurance policy. Here are the stipulations:

– 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 insurance 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, 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 unfortunately 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 10% of your adjusted gross income. Your state may offer an additional break from your state income taxes for qualified long-term-care insurance premiums.

Although the premiums may be tax deductible and you can use HSA to pay for them, the reality is that only about 10% of the population has this type of traditional long-term care insurance, and for many good reasons. Mr. Farr generally does not recommend traditional long-term care insurance, but prefers hybrid policies with long-term care benefits, when appropriate. Please read our most recent article on this subject for more details.

To discuss traditional long-term care insurance or hybrid policies with long-term care benefits or other strategies for long-term care planning, please contact Mr. Farr to make an appointment for an initial consultation.


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About Renee Eder

Renee Eder is the Director of Public Relations for the Farr Law Firm, and gives the voice to the Critters of Critter Corner. Renee’s poodle, Penny, is an official comfort dog who she and her children bring to visit with seniors who are in the early stages of dementia at a local senior home once a month.