I have an HSA (through my W2 employment, who does NOT offer LTC coverage). I also have separate 1099 income as a sole proprietor.
I know that HSA funds can be used to pay for LTC premiums (up to a certain $ amount per year based on age). I also know that LTC premiums can normally be deduced as a business expense for those who are self-employed (up to a certain $ amount per year based on age).
What I am unclear on is - if I were to pay for LTC premiums via my HSA, does that disqualify those premiums from also being deducted from Schedule C?
Thank you.
First the SEHI is a deduction on the form 1040 and NOT on the Sch C although the program asks about them when completing the Sch C section. And no, you cannot use the HSA account to pay the LTC premiums AND deduct them as an adjustment to income ... that is illegal double dipping.
Yes, you can use money from your HSA tax-free to pay your long-term care insurance premiums, with the maximum annual tax-free amount based on your age.
If you’re 40 or younger, you can withdraw up to $430 tax-free from an HSA in 2020 to pay the premiums; if you’re age 41 to 50, you can take out $810; if you’re age 51 to 60, $1,630; if you’re age 61 to 70, $4,350; and if you’re age 71 or older, $5,430. If you and your spouse both have long-term-care policies, you can each use money tax-free from your HSA to pay premiums, up to the aged-based maximum for each of you (based on your ages by the end of the year). These limits increase slightly each year for inflation.
if you use an HSA to pay the premiums there is no tax deduction for them