Health Savings Accounts (HSAs) and Long-Term Care: Limits, Tax Rules and the Medicare 6-Month Rule

The Account Most People Use Like a Debit Card

Most people treat an HSA like a checking account for copays. Money goes in. Money comes out at the pharmacy. The balance stays small.

That is not wrong. But it leaves the best part on the table.

An HSA can be invested. It can grow for decades. And it can pay for some of the most expensive costs of getting older: long-term care insurance premiums, Medicare premiums and care itself.

Here is the uncomfortable truth. Medicare does not pay for custodial care. Help with bathing, dressing, eating and getting to the bathroom is on you. Nationally, home care runs about $6,673 a month.

Most families start planning for that after a fall or a diagnosis. By then, an HSA can only hold what is already in it. The years you could have been contributing are gone.

An HSA is an early planning tool. The earlier you start, the more it can do.

What Is a Health Savings Account?

A health savings account is a savings account you own that pays for qualified medical expenses. You can open one only if you are covered by an HSA-eligible health plan.

It is the only account with three tax breaks at once:

• Contributions are tax-deductible. If you contribute through payroll at work, the money also skips Social Security and Medicare taxes.
• Growth is tax-free. Interest and investment earnings are not taxed while they stay in the account.
• Withdrawals for qualified medical expenses are tax-free. At any age.

A 401(k) or traditional IRA gives you a tax break going in, but you pay tax coming out. A Roth gives you tax-free money coming out, but no break going in. An HSA gives you both, as long as you spend the money on qualified expenses.

A few things to know up front:

• It is not a flexible spending account (FSA). An FSA belongs to your employer and generally has to be used each year. An HSA belongs to you and rolls over forever.
• It can be invested. Many HSA providers let you move money into mutual funds or other investments once your cash balance passes a minimum.
• Employer contributions count toward your limit. If your employer puts in $1,000, you can put in $1,000 less.

Who Qualifies for an HSA

To contribute to an HSA, generally:

• You are covered by an HSA-eligible health plan. For 2026, a traditional high-deductible health plan must have a deductible of at least $1,700 for self-only coverage or $3,400 for family coverage, with out-of-pocket costs capped at $8,500 or $17,000.
• Or you have a bronze or catastrophic plan. Starting January 1, 2026, the One Big Beautiful Bill Act made these plans HSA-compatible, even if they do not meet the deductible rules.
• You have no other disqualifying health coverage. A spouse's regular health plan that covers you can disqualify you.
• You are not enrolled in any part of Medicare. Not Part A. Not Part B.
• No one else can claim you as a tax dependent.

The 2026 law changes also let you keep an HSA with certain direct primary care memberships, and they made the telehealth exception permanent.

2026 and 2027 HSA Contribution Limits

You have until the tax filing deadline, usually April 15, to make contributions for the prior year.

If you are married and both 55 or older, each of you can add a $1,000 catch-up. But each spouse needs an HSA in their own name to do it.

5 Ways an HSA Can Help Pay for Long-Term Care

1. Pay long-term care insurance premiums tax-free

This is the one most people miss.

Regular health insurance premiums are generally not qualified HSA expenses. Long-term care insurance is an exception. You can pay premiums for a tax-qualified long-term care insurance policy from your HSA, tax-free, up to an age-based limit set by the IRS each year.

The limit is per person. A married couple in their 60s could pay up to $9,920 in combined premiums tax-free in 2026.

Why this matters: to deduct long-term care premiums on your tax return, your total medical expenses usually have to pass 7.5% of your income, and you have to itemize. Most people never clear that bar. An HSA gets you the tax break anyway.

Not every policy counts. It has to be a tax-qualified long-term care insurance contract. Some hybrid life and long-term care policies do not qualify. Ask the carrier before you assume.

2. Pay for long-term care services

Qualified long-term care services can be paid from an HSA tax-free. Under IRS rules, that generally means care for someone who is chronically ill, provided under a plan of care from a licensed health care practitioner. That can include help at home with daily activities.

A nursing home stay can count in full if the main reason for being there is medical care. For assisted living, generally only the care portion counts, not room and board.

Keep the paperwork. If the IRS asks, you will need to show the care was qualified.

3. Pay Medicare premiums after 65

Once you are 65, your HSA can pay Medicare Part B, Part D and Medicare Advantage premiums tax-free. In 2026, the standard Part B premium is $202.90 a month. That adds up to more than $2,400 a year, per person, for as long as you are on Medicare.

The exception: Medigap (Medicare supplement) premiums are not qualified expenses. If you pay them from an HSA, that money is taxed.

4. Make the home safer

Grab bars. Ramps. Wider doorways. A walk-in shower. When a change is made mainly for medical care, it may count as a qualified expense. If the change adds to your home's value, only the part above that added value counts. Ask your doctor to document why the change is needed, and ask a tax professional before you spend.

5. Reimburse yourself years later

There is no deadline to reimburse yourself, as long as the expense came after you opened the HSA and you keep your receipts.

That means you can pay a medical bill out of pocket today, let your HSA keep growing, and pay yourself back in 10 or 20 years. Tax-free. When care starts, those saved receipts become cash you can use.

The Medicare 6-Month Rule: Stop Contributing Before You Enroll

This is the section I most want people in their 60s to read.

You cannot contribute to an HSA for any month you are enrolled in Medicare. That part is simple. The trap is the timing.

If you sign up for Medicare Part A after you turn 65, Part A coverage is backdated up to 6 months, but never earlier than the month you turned 65. Any HSA contributions made during those backdated months become excess contributions. If you do not take them out by the tax deadline, you owe a 6% excise tax for every year they stay in the account.

It gets more confusing:

• Signing up for Social Security after 65 automatically enrolls you in Part A, and the 6-month backdating applies.
• You cannot turn down Part A while you collect Social Security.
• Employer contributions count too. Tell HR to stop yours and theirs.

The fix is planning. If you are working past 65 and keeping your HSA, stop all contributions at least 6 months before you apply for Medicare or Social Security. Then count your eligible months and cut that year's contribution to match.

Here is the good news. Once you are on Medicare, you can keep spending the money already in your HSA. You just cannot add more. Learn more in the Medicare Guide.

What an HSA Can Build, and What Care Costs

Here is a simple example. Someone starts at 50, contributes $4,400 a year until 65, adds the $1,000 catch-up from 55 and earns 5% a year. They end up with more than $100,000.

That example assumes the limit never goes up, which it does, and a steady return, which no one can promise. It is an illustration, not a projection.

Now compare $100,000 with what care costs.

Source: the 2025 CareScout Cost of Care Survey, as shown on LTCareNav Care Costs by State. Last updated March 2026. The $100,000 is an illustration. Not all assisted living costs are qualified HSA expenses.

According to the U.S. Administration for Community Living, someone turning 65 has almost a 70% chance of needing long-term care. Women need it for 3.7 years on average and men for 2.2 years.

An HSA on its own will not pay for years of care. It can pay the premiums on a policy that does. It can cover Medicare premiums for years. It can pay for the first months of care while other benefits kick in.

These are national medians. Costs in your state could be much higher or lower. See the numbers where you live on Care Costs by State.

Taxes, Medicaid and What Happens When You Die

• Withdrawals before 65 for anything other than qualified medical expenses are taxed as income, plus a 20% penalty.
• After 65, the penalty goes away. Withdrawals for non-medical expenses are taxed as income, like a traditional IRA. Qualified medical expenses stay tax-free.
• State taxes. Most states follow the federal rules. A few, including California, do not. Check your state.
• Medicaid. An HSA balance generally counts as an asset if you apply for Medicaid. Rules vary by state. See your state's rules in the Medicaid Long-Term Care Guide and talk with an elder law attorney.
• Family expenses. Your HSA can pay qualified expenses for your spouse and tax dependents, even if they are not on your health plan. If a parent qualifies as your tax dependent, your HSA may be able to help with their care. The rules are narrow. Ask a tax professional.

When you die

• If your spouse is the beneficiary, the HSA becomes your spouse's HSA, with all the same tax breaks.
• If anyone else is the beneficiary, the account stops being an HSA. The balance becomes taxable income to them that year.
• If no one is named, it goes to your estate and is taxed on your final return.

Name a beneficiary. Then tell your family the account exists. A lot of families never find out.

HSA vs. FSA vs. 401(k) or IRA

Compare every option side by side in Financial Tools. Read more in our guides to annuities and long-term care, reverse mortgages and long-term care, short-term care insurance and how to pay for long-term care.

Pros and Cons of an HSA for Long-Term Care

Advantages

• Contributions reduce your taxable income. Through payroll, they also skip Social Security and Medicare taxes.
• Growth and qualified withdrawals are tax-free.
• Long-term care insurance premiums are qualified expenses, up to IRS age-based limits.
• Qualified long-term care services and Medicare premiums can be paid tax-free.
• No use-it-or-lose-it rule. The money rolls over every year.
• The account is yours. It stays with you if you change jobs or retire.
• No required minimum distributions.
• After 65, no penalty on non-medical withdrawals. They are taxed as income.

Considerations

• Requires an HSA-eligible health plan. A high deductible means more out of pocket when you need care now.
• 2026 limits are $4,400 self-only and $8,750 family, plus $1,000 if you are 55 or older.
• No new contributions once you enroll in any part of Medicare.
• Part A can be backdated 6 months, which can create a tax penalty if you keep contributing.
• Long-term care premium limits are capped by age. Premiums above the cap are not tax-free.
• Medigap premiums are not qualified expenses.
• Withdrawals before 65 for non-medical expenses are taxed and hit with a 20% penalty.
• An HSA left to a non-spouse becomes taxable income to that person.

Who an HSA Fits

An HSA may be worth a closer look if:

• You are still working and have, or can choose, an HSA-eligible health plan.
• You are in your 40s, 50s or early 60s and have years left to contribute.
• You can pay everyday medical costs from your paycheck and let the HSA grow.
• You own, or plan to buy, a tax-qualified long-term care insurance policy.
• You want a tax-free bucket for Medicare premiums in retirement.

It may not be the right fit if:

• You have ongoing health needs that make a high deductible hard to afford.
• You are already enrolled in Medicare. You can spend an existing balance, but you cannot add to it.
• You would need the HSA money for everyday bills, with nothing left to grow.
• You are counting on it as your whole long-term care plan. It is one piece.

The question is not "Do I have an HSA?" The question is "Am I using it for what is coming?"

How to See If an HSA Fits Your Care Plan in 5 Steps

1. Check your eligibility. Look at your health plan options during open enrollment. Ask HR or your insurer whether the plan is HSA-eligible.
2. Project the care. Use the Health Trajectory tool and the Care Assessment to see what level of care may be ahead.
3. Check your care runway. Look up costs on Care Costs by State, then see how long your finances will last.
4. Model the HSA. Open the Health Savings Account calculator and choose the situation closest to yours: monthly income, liquid assets, home value and age range. Create a free account to enter your real numbers.
5. Put a date on your calendar. If you will work past 65, mark the month to stop contributing, 6 months before you plan to sign up for Medicare or Social Security. Tell HR in writing.

The calculator gives general estimates to show how an HSA could fit your plan. Actual results depend on your contributions, investment returns, tax situation and IRS rules at the time. It is a starting point for the conversation, not tax advice.

Questions to Ask Before You Count on Your HSA

• Is my health plan HSA-eligible for next year?
• How much does my employer contribute, and how much room does that leave me?
• Can I invest my HSA balance? What are the fees and the minimum cash balance?
• Is my long-term care insurance policy tax-qualified?
• Can I pay my long-term care premium directly from my HSA?
• When should I stop contributing if I plan to work past 65?
• Who is my beneficiary, and does my family know this account exists?
• Does my state tax HSA contributions or growth?

Write down the answers. Get them in writing if you can.

Frequently Asked Questions

Start Early. It Matters More Here Than Anywhere.

Most long-term care strategies get harder with age. Insurance gets more expensive. Health questions get harder to pass.

An HSA works the other way. Every year you contribute is another year of tax-free growth. And it only works while you are still eligible to put money in.

If you have an HSA-eligible plan right now, that window is open. It will not be open forever.

• Model it with the Health Savings Account calculator, and compare it with every other option in Financial Tools.
• Check how long your finances will last if care starts tomorrow.
• See how much care may be ahead with the Health Trajectory tool.
• Check care costs where you live with Care Costs by State.
• Connect with a vetted professional in the Marketplace.

Not sure where to start? See how every piece fits together in one place to plan for long-term care.

It is free for families.

LTCareNav provides general educational information, not tax, legal, insurance or financial advice. HSA limits and rules are set by the IRS and can change. State tax treatment varies. Medicaid rules vary by state. Figures reflect 2026 amounts unless noted. Talk with a tax professional, a licensed insurance professional and, if Medicaid may be needed, an elder law attorney before you decide.

Sources

• IRS Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans
• IRS Publication 502: Medical and Dental Expenses
• IRS Revenue Procedure 2025-19: 2026 HSA and HDHP Limits
• Mercer: 2027 HSA, HDHP and Excepted-Benefit HRA Figures Set
• IRS: Treasury, IRS Provide Guidance on New Tax Benefits for HSA Participants Under the One, Big, Beautiful Bill
• ElderLawAnswers: New Long-Term Care Insurance Premium Deductions for 2026
• CMS: 2026 Medicare Parts A & B Premiums and Deductibles
• Healthline: When Should I Stop Contributing to My HSA Before Medicare?
• U.S. Administration for Community Living: How Much Care Will You Need?
• Medicare.gov: Long-Term Care
• LTCareNav Care Costs by State (the 2025 CareScout Cost of Care Survey, updated March 2026)