Using HSA Funds for Long-Term Care Expenses

Yes, funds from a health savings account (HSA) can be used to pay for both long-term care (LTC) insurance premiums and medically necessary long-term care services, such as those provided to residents of assisted living and memory care communities, and to patients in skilled nursing facilities or nursing homes.^[01]

The IRS imposes limits on how much money an HSA account holder can use to pay LTC insurance premiums. In 2025, those limits are:^[02]

• $1,800 for people 51 to 60
• $4,180 for people 61 to 70
• $6,020 for people 70 and older

Because HSA funds can be used for any qualified medical expense, they can also be used for:

• Copays
• Prescriptions
• Ambulatory assistance equipment and other durable medical equipment
• Dental and vision costs
• Medically necessary in-home caregiver services

The U.S. Internal Revenue Service (IRS) maintains a complete list of qualified medical expenses in Publication 502.

Let our care assessment guide you

Room and board in assisted living and memory care communities aren’t considered medical expenses and can’t be covered using funds from an HSA. Other expenses that aren’t eligible to be paid with HSA funds include, but aren’t limited to:

• Cosmetic surgery, unless it’s intended to repair injuries, congenital abnormalities, or a disfiguring disease
• Products such as skin care, dental hygiene, and diet foods, unless they’re prescribed for the treatment of a medical condition
• Recreational activities
• Companion care or homemaker services

What’s a letter of medical necessity (LMN)?

For long-term care expenses that aren’t clearly allowable or aren’t listed in the IRS Publication 502, doctors can write a letter of medical necessity, or LMN. This must state that the product or service is necessary for the diagnosis or treatment of a medical condition to use HSA funds.^[03]

An HSA is a savings account attached to a high-deductible health plan (HDHP) — a health insurance plan with a high minimum deductible.^[04,05] Account holders contribute as much pre-tax money into the account as they prefer up to the yearly contribution limit. In 2025, the contribution limit for an individual over 55 is $5,150.^[01]

Unlike a flexible spending account (FSA), funds in an HSA roll over from year to year, allowing it to accumulate value over time through direct contributions and/or mutual fund investments made from within the account.

What are the advantages of an HSA?

HSAs aren’t available to everyone. For example, Medicare recipients aren’t allowed to contribute to an HSA. But for those not yet receiving Medicare, an HSA can be a valuable tax-savings tool because:^[05]

• Money in an HSA is deducted from a paycheck before taxes are calculated. This means account holders don’t have to pay income taxes on deposited funds and can use an HSA to lower their taxable income.
• Account holders can use HSA funds at any time for qualified medical expenses.
• HSA funds earn tax-free interest.
• Accounts are portable, meaning they remain with an account holder if they leave the employer that sponsored their account.

Is there a downside to relying on HSA funds to pay long-term care expenses?

HSA funds can’t be used to pay all types of long-term care expenses, so if an account holder uses them to pay unqualified expenses, they’re subject to a 20% penalty and the money that’s withdrawn is considered taxable income.

Talk with a Senior Living Advisor

As your loved ones consider the cost of senior care, it’s important to sit down with them and discuss financial plans. The benefit of an HSA is that it can be used for any qualified medical expense. So, even if your loved one doesn’t have enough money in their HSA to cover all their care, they may still be able to pay for a portion of their expenses with the account.

If your loved one needs long-term care, a Senior Living Advisor at A Place for Mom can help answer questions about your next steps.