New 2017 HSA Limits – Use Your Health Savings Account for Long Term Care


HSA for long term careIf you participate in a healthcare plan with a high deductible, you probably already know that you can use your Health Savings Account (HSA) funds to pay for IRS-approved health care and medical expenses as well as some health insurance deductibles and coinsurance, right? And you probably also know that you can use your HSA funds to pay for qualified expenses for your spouse or dependents, right? BUT, are you aware that HSA funds can be used to pay for qualified medical expenses and qualified long term care services for an elderly parent that is also considered your dependent as well?  You can, if you know the IRS definitions and the IRS rules!

Qualified Medical Expenses are a defined by the IRS to include payments for medical care, prescription drugs, and yes, even payments for long term care! You can include in medical expenses both amounts paid for qualified long-term care services and the premiums paid for qualified long-term care insurance contracts.

Qualified Long-Term Care Services are a defined by the IRS to include payments for necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services that are:

     ~  Required by a chronically ill individual, and

     ~  Provided pursuant to a plan of care prescribed by a licensed health care practitioner.

Maintenance or Personal Care Services provide a chronically ill individual with disabilities (including cognitive impairment) with needed assistance. An individual is considered chronically ill if, within the previous 12 months, a licensed medical practitioner certified that:

     ~  The individual is unable to perform at least two (2) activities of daily living without assistance for 90 days, due to a loss of “functional capacity”. The activities of daily living (ADLs) are eating, toileting, transferring, bathing, dressing, and continence.

     ~  The individual requires supervision and protection for their health and safety due to severe cognitive impairment.

Qualified Long-Term Care Insurance Contracts must provide only coverage of qualified long-term care services. The contract must:

      ~  Be guaranteed renewable, 

      ~  Not provide for a cash surrender value,

     ~  Provide that refunds (other than refunds for death or cancellation of the contract) and dividends are used only to reduce future premiums or increase future benefits, and

     ~  Generally not reimburse expenses that would be reimbursed under Medicare, except where Medicare is a secondary payer, or the contract makes per diem or other periodic payments without regard to expenses.

     ~  Note that the amount that can be withdrawn from an HSA to pay for qualified long-term care premiums is limited. Here are the 2015 amounts, which will be annually adjusted in 2016 for inflation later in the year: 

        √ Age 40 or under – $380

        √ Age 41 to 50 – $710

        √ Age 51 to 60 – $1,430

        √ Age 61 to 70 – $3,800

        √ Age 71 or over – $4,750

Now that you know what the eligible expenses are, the next step is figuring out that if you are caring for an elderly parent, does your parent qualify as your dependent?  If the answer is yes, it might also mean additional tax benefits for you if you can claim your parent as a dependent on your tax return. They can be any age, but no one else may claim them.

Next you must determine whether or not both of you meet the relevant IRS criteria*:

     ~  To qualify as a dependent they must live with you all year as a member of your household, or if they do not live with you, they must be your father, mother, mother-in-law or father-in-law, stepfather or stepmother, grandparent, even brother or sister of your father or mother (aunt or uncle) but not a foster parent.

     ~  Their gross income for the year must be under $4000 (may still be adjusted for inflation later in 2016). Tax-exempt income, such as social security benefits, is not included in gross income but under certain circumstances you must take into consideration income from interest or dividends.

     ~  They must also meet the support test, meaning you have to provide more than half of the individual’s total support from all sources during the calendar year. This includes any support provided from their own funds. Support includes amounts spent on food, lodging, clothing, education, medical and dental care, medical insurance premiums you pay, including premiums for supplementary Medicare coverage, recreation, transportation, and similar necessities. The individual’s own funds are not considered support unless they are actually spent for support.

Last but not least, for planning purposes, be mindful of the newest HSA inflation adjusted items recently released by the IRS:

     ~  For calendar year 2017, the annual limitation on deductions for an individual with self-only coverage under a high deductible health plan is now $3,400. The annual limitation on deductions for an individual with family coverage under a high deductible health plan is $6,750. (same as 2016). 

     ~  For calendar year 2017, a “high deductible health plan” is defined as a health plan with an annual deductible that is not less than $1,300 for self-only coverage (same as 2016) or $2,600 for family coverage, (same as 2016) and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,550 (same as 2016) for self-only coverage or $13,100 (same as 2016) for family coverage.

More info on what expenses the IRS deems eligible can be found by clicking hereHome Health for Seniors, care management

Contact us: Regal’s professionals are not tax experts, but we are clinicians and patient advocates who understand that long term care is an integral part of the puzzle needed to allow Seniors to age well and comfortably in the home. Regal can provide care managers and caregivers who can bring a broad spectrum of home health services to families and individuals tailored to meet their specific needs which are affordable and may qualify for certain financial breaks or tax benefits. Regal can also assist you in maximizing whatever long term care insurance benefits you qualify for according to your plan. Contact Ferial Andre, RN, CCM, CDP, for more information at 561-499-8382 or ferialandre@regalcares.com.

*There are additional special rules and qualifying factors (of course, this is the IRS), plus issues that might have an impact that can be reviewed by clicking here. 

Please Note: As always when it comes to the government and the IRS there are exceptions. This article is not intended to be medical, legal, or financial advice.