Can an HSA Pay for Long-Term Care Across the Border?

Families comparing assisted living or memory care soon reach the money question. Monthly fees, care levels and entrance deposits add up fast. Many retirees forget one account that was built for this kind of cost.

A Health Savings Account can cover a good share of later-life care when the rules are followed. It gets trickier for retirees who split their lives between the US and Canada, since the tax breaks stop at the border. Here is what the account can pay for, when contributions end and what a move north changes.

What Long-Term Care Costs Can an HSA Cover?

HSA money comes out tax-free when it pays for qualified medical expenses. IRS Publication 502 counts qualified long-term care services in that group. These include help with bathing, dressing and other daily tasks for a chronically ill person.

A licensed health care practitioner must certify the condition within the previous 12 months. The person must need substantial help with at least two activities of daily living for 90 days or more. Severe cognitive impairment, such as advanced dementia, also qualifies. The care must follow a written plan of care.

Nursing home costs, including meals and lodging, count when medical care is the main reason for the stay. In assisted living, only the care portion usually qualifies, not the rent. Some CCRC entrance fees also include a medical portion, and the community can often state that share in writing.

How Much of a Care Insurance Premium Counts?

Premiums for a qualified long-term care insurance policy are also eligible HSA expenses. The IRS caps the amount by age, and the caps rise most years. These are the 2026 limits per person, set in IRS Revenue Procedure 2025-32.

Any premium above the cap must come from other money. A married couple aged 72 could use up to $12,400 of HSA funds for their two policies.

What Happens to Your HSA When Medicare Starts?

Medicare ends new contributions, but it does not end the account. The order of events matters, so it helps to plan the year you turn 65.

1. Your contribution limit drops to zero from the first month you are enrolled in Medicare.
2. Premium-free Part A can start up to six months before the month you apply, though not before age 65.
3. That backdating means you should stop contributing about six months before you sign up late.
4. HSA funds can pay Part B, Part D and Medicare Advantage premiums, though not Medigap premiums.
5. After 65, non-medical withdrawals avoid the 20% penalty but count as taxable income.

Before Medicare, the 2026 contribution limit is $4,400 for self-only coverage and $8,750 for family coverage. People aged 55 or older can add $1,000 more. The balance you build stays yours to spend on qualified costs for life.

Why Doesn't Medicare Pay for Assisted Living?

Many families assume Medicare will handle long-term care. The Center for Retirement Research at Boston College cites a KFF survey on this point. It found 45% of adults 65 and older believed Medicare would pay for a nursing home stay.

In fact, Medicare does not cover custodial care in a nursing home, in assisted living or at home. It pays for short skilled nursing stays after a hospital stay of three or more days. Over half of those covered stays last 20 days or less, and over 90% last 60 days or less.

The same research looked at who pays for paid care from age 65 onward. Medicaid covered 42% of projected spending, and families paid 38% out of pocket. Families in the gray area between independence and full-time help often learn this late. Since Medicaid has strict income and asset limits, most people pay their own way at first.

Are Retirees Building Enough HSA Savings?

Most holders spend as they go rather than build a care fund. The EBRI HSA database found that 56% of accounts took a distribution in 2024. The average distribution was $1,870, and out-of-pocket health spending rose 5.9% that year.

Only 18% of holders invested any of their balance beyond cash. That matters for care planning, because cash grows slowly over two decades. Older holders were more likely to invest, which suggests many people start late.

What Changes If You Retire to Canada?

Snowbirds who keep US residency see little change. A permanent move to Canada is different, because Canada does not recognize the HSA's tax shelter.

• Canada generally taxes the investment income inside the account each year.
• Residents of Canada usually cannot make US-deductible contributions, and Canada offers no deduction either.
• Keeping the account open usually avoids a distribution penalty.
• Spending the funds on eligible care costs keeps withdrawals tax-free on the US side.
• US citizens still file US returns, so the account shows up on paperwork in both countries.

How Can Families Plan Ahead?

A few early steps make an HSA far more useful when care needs arrive.

1. List the care settings you are weighing, from home care to choosing a CCRC.
2. Ask each community for an itemized bill that separates care from housing.
3. Get a plan of care from a licensed practitioner before using HSA funds for care.
4. Keep receipts, since you can reimburse yourself later for qualified costs paid after the HSA opened.
5. If a move to Canada is likely, talk to a cross-border adviser before you sell your US home.

Frequently Asked Questions

Can I Use My HSA to Pay for Assisted Living?

Partly. The care portion can qualify when a licensed practitioner certifies a chronic illness and sets a plan of care. Rent and meals usually do not qualify unless medical care is the main reason for the stay.

Can I Keep Contributing to an HSA After I Sign Up for Medicare?

No. Your contribution limit becomes zero from the first month of Medicare enrollment. You can still spend the existing balance tax-free on qualified expenses.

Does an HSA Pay Long-Term Care Insurance Premiums?

Yes, up to an age-based IRS limit. For 2026 that limit is $4,960 for ages 61 to 70 and $6,200 for ages 71 and over. Anything above the limit must come from other funds.

Does Moving to Canada Change How My HSA Is Taxed?

The account stays open, but Canada does not honor its US tax shelter. Canada generally taxes the yearly investment income, and new contributions bring no deduction. A cross-border adviser can help you decide when to spend it down.

Making Health Savings Last Into Later Life

An HSA is one of the few accounts that can pay for care without tax. Used well, it can cover care services, insurance premiums and Medicare costs. Start planning before 65, keep your records, and get cross-border advice before any move north.