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Can a Health Savings Account (HSA) Be Utilized for Assisted Living Expenses?
Date Updated: July 26, 2024
Written by:
Rachel Lustbader is a writer and editor with a background in healthcare and technology. Her work has been published on websites including HealthCare.com, BiteSizeBio.com, BetterHelp.com, Caring.com, and PayingforSeniorCare.com. She studied health science and public health at Boston University.
Both of Rachel’s grandmothers had very positive experiences in senior living communities, and Rachel saw firsthand the impact that kind, committed caregivers and community managers can have on seniors’ and their family members’ lives. With her work at Caring, Rachel hopes to help other families find communities, caregivers, and at-home products that benefit elderly loved ones and make life less stressful for family caregivers
A Health Savings Account (HSA) can be utilized for assisted living expenses. By the end of 2022, an estimated 72 million Americans had an HSA, 42.6% of whom were adults aged 55 and older. But, even with so many older adults holding HSAs, they’re a source of financing that many are unaware could help pay for residential care or cover the premiums for long-term care insurance. With assisted living costing an average of $54,000 per year, HSAs are an important asset that seniors need to utilize to cover costs.
What is a Health Savings Account?
A Health Savings Account is a personal savings account that lets people put money aside to pay for future medical expenses. Holders make pretax deposits, and any interest earned on the account is also tax-free. The IRS places limits on the amount account holders can deposit each year. For 2024, the limits are $4,150 for individual coverage and $8,300 for family coverage. Adults aged 55 and older can make an additional catch-up contribution of $1,000.
How a HSA can cover assisted living expenses
Account holders can withdraw funds at any time to pay for any of the following medical expenses specified by the IRS:
- Dental and vision
- Prescriptions
- Home care services
- Home improvements
- Diagnostic devices
- Skilled nursing care
- Insurance premiums
- Health care coverage for seniors aged 65 and older, including Medicare
In addition, an HSA could cover some assisted living expenses if a doctor provides a letter of medical necessity and verifies a senior’s need for long-term care. When retirees have no medical need, an HSA won’t directly pay for assisted living services. However, seniors can use funds to pay long-term care insurance premiums.
Using a Heath Savings Account for dependents
In certain circumstances, account holders can use their own HSA to pay an elderly relative’s assisted living expenses. If you care for a parent, in-law, grandparent, uncle or aunt, they may qualify as a tax dependent, allowing you to cover their medical costs.
It’s also possible to release funds on behalf of a family member who holds an HSA to pay for long-term care if you are: