Paying for care
Health savings account (HSA)
A health savings account is a tax-favored account for people with a qualifying high-deductible health plan. Money in the account can pay for qualified medical expenses without tax if used correctly. Qualified expenses are costs for medical care as defined by the IRS, for you, your spouse, and your dependents.
Why it matters for your family
IRS Publication 969 explains the rules. Distributions for qualified medical expenses are tax free. Other withdrawals are taxable and may carry an additional 20 percent tax. You cannot also deduct the same expense on Schedule A. Whether a home care cost counts depends on whether it is qualified medical care. Personal care can qualify in some cases, such as qualified long-term care services for a chronically ill person. A common mistake is to assume all caregiving costs qualify. Ask a tax professional before using the account for home care. The account stays with the owner, and the owner is responsible for keeping receipts that show how the money was used.
Source: irs.gov
Related terms
- Medical expense tax deductionThe medical expense tax deduction lets people who itemize deduct medical and dental costs above 7.5 percent of adjusted gross income.
- Dependent care flexible spending accountA dependent care flexible spending account is an employer plan that lets an employee set aside pre-tax pay for care costs so the employee can work.
- Long-term care insuranceLong-term care insurance is a private policy that pays for help with daily living when a person can no longer manage alone.
- Private payPrivate pay means a family pays for care directly from its own money.
- Cost of home careThe cost of home care is the amount a family pays for in-home help.
- Medicare Part BMedicare Part B is medical insurance.
