HSAs and LTC Premiums

[sdmillar]

Can some of the LTC experts out there please confirm my interpretation on the following?

Client and his wife have a HSA and want to purchase Tax Qualified LTC insurance. They could put enough money in their HSA savings account and pay their LTC premiums each month from that account, thereby saving the income tax on those dollars each year correct? As long as they do not go over their max yearly HSA contributions, this works, correct?

Sounds like the best way to pay LTC premiums if you have a HSA.

 

[yankee466]

You get a tax break by putting the money into the HSA account, up to the IRS limit based on your age. Whether you use it to pay LTC premiums with it is up to you, but if you have HSA eligible health insurance (not all plans are HSA eligible), then a HSA and LTC premiums do make sense. You can only deduct up to the max LTC premium allowed by the IRS, which is not necessarily the entire LTC premium.

So, be careful how you advise on this. You can't tell someone to open up a HSA account if they have the wrong health insurance....but I am assuming you knew that. I am sure others will chime in. I have sold plenty of HSA health plans along with LTC policies because of how they work together.

 

[Mr_Ed]

Can some of the LTC experts out there please confirm my interpretation on the following?

Client and his wife have a HSA and want to purchase Tax Qualified LTC insurance. They could put enough money in their HSA savings account and pay their LTC premiums each month from that account, thereby saving the income tax on those dollars each year correct? As long as they do not go over their max yearly HSA contributions, this works, correct?

Sounds like the best way to pay LTC premiums if you have a HSA.

How much of their LTCi premium can be paid with the HSA depends upon their ages.

If they are self-employed, they would be better off deducting the premium under the self-employed health insurance deduction rather than using their HSA.

nadm

 

[Sales71]

U can tell them maybe they can do that but always check with there CPA.

 

[LFC]

How much of their LTCi premium can be paid with the HSA depends upon their ages.

If they are self-employed, they would be better off deducting the premium under the self-employed health insurance deduction rather than using their HSA.

nadm

Here in CA the amount of money that could be put into an HSA account is not based on age, but based on an individual verses family plan. For individuals the maximum is $3,050 and for families is $6,150. If a couple purchases LTC and they fund their HSA account they can use up to $6,150 pre-tax dollars to pay for their premiums. They do need to have an HSA qualified Health insurance plan to open an HSA savings account.

 

[sdmillar]

Never a Dull Moment, I think you are mixing the deduction for LTC premiums with the fact that dollars that go into a HSA savings account are tax deductible. As far as I can understand as long as you use those dollars on HSA qualified expenses, which I believe a Tax Qualified LTC is one, you thereby are paying for your LTC premiums with tax free dollars. There are limits to how much you can put into a HSA savings account each year for an individual or family, but I do not think there are limits for how much you can pay out of a HSA savings account for premiums for a LTC policy.

 

[Mr_Ed]

Never a Dull Moment, I think you are mixing the deduction for LTC premiums with the fact that dollars that go into a HSA savings account are tax deductible. As far as I can understand as long as you use those dollars on HSA qualified expenses, which I believe a Tax Qualified LTC is one, you thereby are paying for your LTC premiums with tax free dollars. There are limits to how much you can put into a HSA savings account each year for an individual or family, but I do not think there are limits for how much you can pay out of a HSA savings account for premiums for a LTC policy.

Maybe this guy has the answer:

10 ways to reduce your taxes with long-term care insurance « LTCShop.com


nadm

 

[scagnt83]

If you have enough in your HSA to pay the LTC premiums then they should go for it up to what the HSA laws allow. (most peoples LTCI premium is more than what they have in their HSA..)


The real question would be if the premiums paid out of the HSA are deductible on your tax return.
(I would guess probably not, the feds usually dont let you deduct money that hasnt been and never will be taxed...)

 

[Mr_Ed]

Never a Dull Moment, I think you are mixing the deduction for LTC premiums with the fact that dollars that go into a HSA savings account are tax deductible. As far as I can understand as long as you use those dollars on HSA qualified expenses, which I believe a Tax Qualified LTC is one, you thereby are paying for your LTC premiums with tax free dollars. There are limits to how much you can put into a HSA savings account each year for an individual or family, but I do not think there are limits for how much you can pay out of a HSA savings account for premiums for a LTC policy.

The amount that you can withdraw from the HSA to pay the LTCi premium is limited according to the age of the policyholder.

nadm

 

[sdmillar]

The amount that you can withdraw from the HSA to pay the LTCi premium is limited according to the age of the policyholder.

nadm

Really??? Can you show where you see that? Honestly, that is not how I understand it.