Long-term care insurance premiums could also have been paid tax-free through an HSA.
The short answer is that the premium refund will only be taxable if you previously received a tax benefit from paying the premiums, such as taking one of the possible tax deductions or paying the premiums with tax free money. Then, the amount that is actually taxable depends on the “tax benefit rule.“ For example, suppose that last year, you listed $10,000 of premiums as an itemized deduction, but your gross income was $100,000 so that due to the 7.5% rule, you only actually deducted $2500. That’s your tax benefit, so that is the portion of last year’s premiums that would be taxable when they are returned. You will have to do this calculation for every year that you might have included the premiums as a tax deduction or paid for them with tax free money.
