2023 Instructions for Form 8853

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2023

Instructions for Form 8853

Archer MSAs and Long-Term Care Insurance Contracts

Department of the Treasury

Internal Revenue Service

Section references are to the Internal Revenue Code

unless otherwise noted.

Future Developments

For the latest information about developments related to

Form 8853 and its instructions, such as legislation

enacted after they were published, go to

IRS.gov/

Form8853.

What’s New

Q&As on certain qualified medical expenses. You can

find answers to questions regarding whether certain costs

related to nutrition, wellness, and general health are

medical expenses that may be paid or reimbursed under

an Archer MSA at

IRS.gov/Individuals/Frequently-Asked-

Questions-About-Medical-Expenses-Related-to-Nutrition-

Wellness-and-General-Health.

General Instructions

After December 31, 2007, contributions can't be

made to an Archer Medical Savings Account for

you, unless:

•

You were an active Archer MSA participant for any tax

year ending before January 1, 2008, or

•

You became an active Archer MSA participant for a tax

year ending after December 31, 2007, because of

coverage under a high deductible health plan (HDHP) of

an Archer MSA participating employer.

Purpose of Form

Use Form 8853 to:

•

Report Archer MSA contributions (including employer

contributions),

•

Figure your Archer MSA deduction,

•

Report distributions from Archer MSAs or Medicare

Advantage MSAs,

•

Report taxable payments from long-term care (LTC)

insurance contracts, or

•

Report taxable accelerated death benefits from a life

insurance policy.

Additional information. See Pub. 969, Health Savings

Accounts and Other Tax-Favored Health Plans, for more

details on MSAs.

Who Must File

You must file Form 8853 if any of the following applies.

•

You (or your employer) made contributions for 2023 to

your Archer MSA.

•

You are filing a joint return and your spouse (or their

employer) made contributions for 2023 to your spouse's

Archer MSA.

CAUTION

•

You (or your spouse, if filing jointly) acquired an interest

in an Archer MSA or a Medicare Advantage MSA because

of the death of the account holder. See Death of Account

Holder, later.

•

You (or your spouse, if filing jointly) were a policyholder

who received payments under an LTC insurance contract

or received any accelerated death benefits from a life

insurance policy on a per diem or other periodic basis in

2023. See the instructions for

Section C, later.

•

You (or your spouse, if filing jointly) received Archer

MSA or Medicare Advantage MSA distributions in 2023.

If you (or your spouse, if filing jointly) received

Archer MSA or Medicare Advantage MSA

distributions in 2023, you must file Form 8853 with

Form 1040, 1040-SR, or 1040-NR even if you have no

taxable income or any other reason for filing Form 1040,

1040-SR, or 1040-NR.

Specific Instructions

Name and social security number (SSN). Enter your

name(s) and SSN as shown on your tax return. If filing

jointly and both you and your spouse each have an Archer

MSA or each have a Medicare Advantage MSA, enter the

SSN shown first on your tax return.

Section A—Archer MSAs

Eligible Individual

To be eligible for an Archer MSA, you (or your spouse)

must be an employee of a small employer or be

self-employed. You (or your spouse) must be covered

under an HDHP and have no other health coverage

except permitted coverage. You must not be enrolled in

Medicare and can't be another person’s dependent. You

must be an eligible individual on the first day of a month to

take an Archer MSA deduction for that month.

Small Employer

A small employer is generally an employer who had an

average of 50 or fewer employees during either of the last

2 calendar years. See Pub. 969 for details.

Archer MSA

Generally, an Archer MSA is a medical savings account

set up exclusively for paying the qualified medical

expenses of the account holder.

Qualified Medical Expenses

Generally, qualified medical expenses for Archer MSA

purposes are unreimbursed medical expenses that could

otherwise be deducted on Schedule A (Form 1040). See

the Instructions for Schedule A (Form 1040), and Pub.

502, Medical and Dental Expenses. Qualified medical

CAUTION

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expenses are those incurred by the account holder or the

account holder's spouse or dependent(s). Amounts paid

for menstrual care products shall be treated as paid for

medical care. See the instructions for Line 7, later. You

can't treat insurance premiums as qualified medical

expenses unless the premiums are for:

•

LTC insurance,

•

Health care continuation coverage, or

•

Health care coverage while receiving unemployment

compensation under federal or state law.

You can find answers regarding whether certain costs

related to nutrition, wellness, and general health are

medical expenses that may be paid or reimbursed under

an Archer MSA at IRS.gov/Individuals/Frequently-Asked-

Questions-About-Medical-Expenses-Related-to-Nutrition-

Wellness-and-General-Health.

High Deductible Health Plan

An HDHP is a health plan that meets the following

requirements.

Self-only

coverage

Family

coverage

Minimum annual deductible

$2,650 $5,300

Maximum annual deductible $3,950 $7,900

Maximum annual out-of-pocket

expenses (other than for premiums) $5,300 $9,650

Other Health Coverage

If you have an Archer MSA, you (and your spouse, if you

have family coverage) can't have any health coverage

other than an HDHP. However, your spouse can have

health coverage other than an HDHP if you aren't covered

by that plan.

Exceptions. You can have additional insurance that

provides benefits only for:

•

Liabilities under workers' compensation laws, tort

liabilities, or liabilities arising from the ownership or use of

property;

•

A specific disease or illness; or

•

A fixed amount per day (or other period) of

hospitalization.

You can also have coverage (either through insurance

or otherwise) for accidents, disability, dental care, vision

care, or long-term care. See Other health coverage in Pub.

969, Health Savings Accounts and Other Tax-Favored

Health Plans, for additional information about exceptions.

Disabled

An individual is generally considered disabled if they are

unable to engage in any substantial gainful activity due to

a physical or mental impairment that can be expected to

result in death or to continue indefinitely.

Death of Account Holder

If the account holder's surviving spouse is the designated

beneficiary, the Archer MSA is treated as if the surviving

spouse were the account holder. The surviving spouse

completes Form 8853 as though the Archer MSA

belonged to them.

If the designated beneficiary isn't the account holder's

surviving spouse, or there is no designated beneficiary,

the account ceases to be an Archer MSA as of the date of

death. The beneficiary completes Form 8853 as follows.

•

Enter “Death of Archer MSA account holder” across the

top of Form 8853.

•

Enter the name(s) shown on the beneficiary's tax return

and the beneficiary's SSN in the spaces provided at the

top of the form and skip Part I.

•

On lines 6a and 6c, enter the fair market value of the

Archer MSA as of the date of death.

•

On line 7, for a beneficiary other than the estate, enter

qualified medical expenses incurred by the account holder

before the date of death that you paid within 1 year after

the date of death.

•

Complete the rest of Part II.

If the account holder's estate is the beneficiary, the fair

market value of the Archer MSA as of the date of death is

included in the account holder's final income tax return.

Complete Form 8853 as described above, except you

should complete Part I, if applicable.

The transfer isn't subject to the additional 20% tax.

Report any earnings on the account after the date of death

as income on your tax return.

Note. If, during the tax year, you are the beneficiary of two

or more Archer MSAs or you are a beneficiary of an

Archer MSA and you have your own Archer MSA, you

must complete a separate Form 8853 for each Medicare

Advantage MSA. Enter “statement” at the top of each

Form 8853 and complete the form as instructed. Next,

complete a controlling Form 8853, combining the amounts

shown on each of the statement Forms 8853. Attach the

statements to your paper tax return after the controlling

Form 8853.

Deemed Distributions From Archer MSAs

The following situations result in deemed distributions

from your Archer MSA.

•

You engaged in any transaction prohibited by section

4975 with respect to any of your Archer MSAs at any time

in 2023. Your account ceases to be an Archer MSA as of

January 1, 2023, and you must include the fair market

value of all assets in the account as of January 1, 2023,

on line 6a.

•

You used any portion of any of your Archer MSAs as

security for a loan at any time in 2023. You must include

the fair market value of the assets used as security for the

loan as income on Schedule 1 (Form 1040), line 8e.

Any deemed distribution won't be treated as used to

pay qualified medical expenses. Generally, these

distributions are subject to the additional 20% tax.

Part I—Archer MSA Contributions and

Deductions

Use Part I to figure:

•

Your Archer MSA deduction,

•

Any excess contributions you made, and

•

Any excess contributions made by an employer (see

Excess Employer Contributions, later).

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Figuring Your Archer MSA Deduction

The amount you can deduct for Archer MSA contributions

is limited by:

•

The applicable portion of the HDHP's annual deductible

(line 3), and

•

Your compensation from the employer maintaining the

HDHP (line 4).

Any employer contributions made to your Archer MSA

prevent you from making deductible contributions. See

Employer Contributions to an Archer MSA, later. Also, if

you or your spouse made contributions in addition to any

employer contributions, you may have to pay an additional

tax. See

Excess Contributions You Make, later.

You can't deduct any contributions you made after you

became enrolled in Medicare. Also, you can't deduct

contributions if you are someone else’s dependent.

Employer Contributions to an Archer MSA

If an employer made contributions to your Archer MSA,

you aren't entitled to a deduction. If you and your spouse

are covered under an HDHP with family coverage and an

employer made contributions to either of your Archer

MSAs, neither you nor your spouse is allowed to make

deductible contributions to an Archer MSA. If you and your

spouse both have an HDHP with self-only coverage and

only one of you received employer contributions to an

Archer MSA, the other spouse is allowed to make

deductible contributions to an Archer MSA.

How To Complete Part I

Complete lines 1 through 5 as instructed on the form

unless (1) or (2), next, applies.

1. If employer contributions to an Archer MSA prevent

you from taking a deduction for amounts you contributed

to your Archer MSA, complete Part I as follows.

a. Complete lines 1 and 2.

b. Skip lines 3 and 4.

c. Enter -0- on line 5.

d. If line 2 is more than zero, see Excess Contributions

You Make, later.

2. If you and your spouse have more than one Archer

MSA, complete Part I as follows.

a. If either spouse has an HDHP with family coverage,

you both are treated as having only the family coverage

plan. Disregard any plans with self-only coverage.

b. If both spouses have HDHPs with family coverage,

you both are treated as having only the family coverage

plan with the lowest annual deductible.

If both spouses have HDHPs with self-only

coverage, complete a separate Form 8853, Section A,

Part I, for each spouse. Enter “statement” across the top

of each Form 8853, fill in the name and SSN, and

complete Part I. Next, add lines 1, 2, and 5 from the two

statement Forms 8853 and enter those totals on the

respective lines of the controlling Form 8853 (the

combined Form 8853 for both spouses). Don't complete

lines 3 and 4 of the controlling Form 8853. Attach the two

statement Forms 8853 to your paper tax return after the

controlling Form 8853.

Line 1

Employer Contributions

Employer contributions include any amount an employer

contributes to any Archer MSA for you or your spouse for

2023. These contributions should be shown in box 12 of

Form W-2 with code R. If your employer made excess

contributions, you may have to report the excess as

income. See

Excess Employer Contributions, later, for

details.

Line 2

Include on line 2 contributions you made to your Archer

MSA in 2023. Also include those contributions made from

January 1, 2024, through April 15, 2024, that were for

2023. Don't include amounts rolled over from another

Archer MSA. See

Rollovers, later.

Line 3

Go through the chart at the top of the Line 3 Limitation

Chart and Worksheet for each month of 2023. Enter the

result on the worksheet next to the corresponding month.

Enter the amount from the last line of the worksheet on

line 3.

If eligibility and coverage for both you and your

spouse didn't change from one month to the next,

enter the same number you entered for the

previous month. If eligibility and coverage didn't change

during the entire year, figure the number for January only,

and enter this amount on Form 8853, line 3.

More than one HDHP. If you and your spouse had more

than one HDHP on the first day of the month and one of

the plans provides family coverage, use the Family

coverage rules on the chart and disregard any plans with

self-only coverage. If you and your spouse both have

HDHPs with family coverage on the first day of the month,

you both are treated as having only the family coverage

plan with the lowest annual deductible.

TIP

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Line 3 Limitation Chart and Worksheet

Before you begin:

Start Here

Were you enrolled in Medicare for the month?

Yes

Were you an eligible individual (see Eligible

Individual, earlier) on the rst day of the

month?

Enter annual deductible

(must be at least $2,650 but

not more than $3,950).

Family coverage

Enter annual deductible

(must be at least $5,300 but

not more than $7,900).

Self-only coverage

What type of coverage did your HDHP provide on the rst day of the month?

If you had more than one HDHP, see More than one HDHP, earlier.

Amount from

chart above

Month in 2023

January . . . . . . . . . . . . . . . . . $

√ See the instructions for line 3.

√ Go through this chart for each month of 2023.

√ Keep for your records.

Enter -0- on

the line below

for the month.

February . . . . . . . . . . . . . . . . . $

March . . . . . . . . . . . . . . . . . . $

April . . . . . . . . . . . . . . . . . . . $

May . . . . . . . . . . . . . . . . . . . $

June . . . . . . . . . . . . . . . . . . . $

July . . . . . . . . . . . . . . . . . . . $

August . . . . . . . . . . . . . . . . . . $

September . . . . . . . . . . . . . . . . $

October . . . . . . . . . . . . . . . . . $

November . . . . . . . . . . . . . . . . $

December . . . . . . . . . . . . . . . . $

Total for all months

Limitation. Divide the total by 12.

Enter here and on line 3

. . . . . . . . . . . . . $

. . . . . . . . . . . . $

Enter 65% (0.65) of the annual

deductible on the line below

for the month.

Enter 75% (0.75) of the annual

deductible on the line below

for the month. If married ling

separately, see Married ﬁling

separately.

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Married filing separately. If you have an HDHP with

family coverage and are married filing separately, enter

only 37.5% (0.375) (one-half of 75%) of the annual

deductible for each month on the worksheet; or, if you and

your spouse agree to divide the 75% of the annual

deductible in a different manner, enter your share.

Line 4

Compensation

Compensation includes wages, salaries, professional

fees, and other pay you receive for services you perform.

It also includes sales commissions, commissions on

insurance premiums, pay based on a percentage of

profits, tips, and bonuses. Generally, these amounts are

included on the Form(s) W-2 you receive from your

employer(s). Compensation also includes net earnings

from self-employment, but only for a trade or business in

which your personal services are a material

income-producing factor. This is your income from

self-employment minus expenses (including the

deductible part of self-employment tax). Compensation

doesn't include any amounts received as a pension or

annuity and doesn't include any amount received as

deferred compensation.

Line 5

If you (or your employer) contributed more to your Archer

MSA than is allowable, you may have to pay an additional

tax on the excess contributions. Figure the excess

contributions using the following instructions. See Form

5329, Additional Taxes on Qualified Plans (Including IRAs)

and Other Tax-Favored Accounts, to figure the additional

tax.

Excess Contributions You Make

To figure your excess contributions, subtract your

deductible contributions (line 5) from your actual

contributions (line 2). However, you can withdraw some or

all of your excess contributions for 2023, and they will be

treated as if they hadn't been contributed if:

•

You make the withdrawal by the due date, including

extensions, of your 2023 tax return (but see the Note

under Excess Employer Contributions below);

•

You don't claim a deduction for the amount of the

withdrawn contributions; and

•

You also withdraw any income earned on the withdrawn

contributions and include the earnings in “Other income”

on your tax return for the year you withdraw the

contributions and earnings.

Excess Employer Contributions

Excess employer contributions are the excess, if any, of

your employer's contributions over the smaller of (a) your

limitation on line 3, or (b) your compensation from the

employer(s) who maintained your HDHP (line 4). If the

excess wasn't included in income on Form W-2, you must

report it as “Other income” on your tax return. However,

you can withdraw some or all of the excess employer

contributions for 2023, and they will be treated as if they

hadn't been contributed if:

•

You make the withdrawal by the due date, including

extensions, of your 2023 tax return (but see the Note

below);

•

You don't claim an exclusion from income for the

amount of the withdrawn contributions; and

•

You also withdraw any income earned on the withdrawn

contributions and include the earnings in “Other income”

on your tax return for the year you withdraw the

contributions and earnings.

Note. If you timely filed your return without withdrawing

the excess contributions, you can still make the withdrawal

no later than 6 months after the due date of your tax

return, excluding extensions. If you do, file an amended

return with “Filed pursuant to section 301.9100-2” written

at the top. Include an explanation of the withdrawal. Make

all necessary changes on the amended return (for

example, if you reported the contributions as excess

contributions on your original return, include an amended

Form 5329 reflecting that the withdrawn contributions are

no longer treated as having been contributed).

Deducting an Excess Contribution in a Later Year

You may be able to deduct excess contributions for

previous years that are still in your Archer MSA. The

excess contribution you can deduct in the current year is

the lesser of the following two amounts.

•

Your maximum Archer MSA contribution limit for the

year minus any amounts contributed to your Archer MSA

for the year.

•

The total excess contributions in your Archer MSA at

the beginning of the year.

Any excess contribution remaining at the end of a tax

year is subject to the additional tax. See Form 5329.

Part II—Archer MSA Distributions

Line 6a

Enter the total distributions you and your spouse received

in 2023 from all Archer MSAs. These amounts should be

shown in box 1 of Form 1099-SA.

Line 6b

Include on line 6b any distributions you received in 2023

that were rolled over. See Rollovers below. Also include

any excess contributions (and the earnings on those

excess contributions) included on line 6a that were

withdrawn by the due date, including extensions, of your

return. See the instructions for line 5, earlier.

Rollovers

A rollover is a tax-free distribution (withdrawal) of assets

from one Archer MSA that is reinvested in another Archer

MSA or a health savings account (HSA) of the same

account holder. Generally, you must complete the rollover

within 60 days following the distribution. An Archer MSA

and an HSA can receive only one rollover contribution in a

1-year period. See Pub. 590-A, Contribution to Individual

Retirement Arrangements (IRAs), for more details and

additional requirements regarding rollovers.

Instructions for Form 8853 (2023)

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Note. If you instruct the trustee of your Archer MSA to

transfer funds directly to the trustee of another of your

Archer MSAs, the transfer isn't considered a rollover.

There is no limit on the number of these transfers. Don't

include the amount transferred in income, deduct it as a

contribution, or include it as a distribution on line 6a.

Line 7

In general, include on line 7 distributions from all Archer

MSAs in 2023 that were used for the qualified medical

expenses (see

Qualified Medical Expenses, earlier) of:

1. Yourself and your spouse;

2. All your dependents; and

3. Any person who would be your dependent except

that:

a. The person filed a joint return;

b. The person had gross income of $4,700 or more; or

c. You, or your spouse if filing jointly, are dependents

of someone else.

For this purpose, a child of parents who are

divorced, separated, or living apart for the last 6

months of the calendar year is treated as the

dependent of both parents whether or not the custodial

parent releases the claim to the child as their dependent.

However, if you or your employer made a contribution to

your Archer MSA in 2023 and you used withdrawals to pay

expenses for an individual who wasn't covered by an

HDHP or was covered by a plan that wasn't an HDHP

(other than the exceptions listed under

Other Health

Coverage, earlier) at the time the expenses were incurred,

then you shouldn't include those withdrawals on line 7.

Example. In 2023, you were covered by an HDHP with

self-only coverage and your spouse was covered by a

health plan that wasn't an HDHP. You made contributions

to an Archer MSA for 2023. You can't include on line 7

withdrawals made from the Archer MSA to pay your

spouse's medical expenses incurred in 2023 because

your spouse was covered by a plan that wasn't an HDHP.

You can't take a deduction on Schedule A (Form

1040) or Schedule A (Form 1040-NR) for any

amount you include on line 7.

Lines 9a and 9b

Additional 20% Tax

Archer MSA distributions included in income (line 8) are

subject to an additional 20% tax unless one of the

following exceptions applies.

Exceptions to the Additional 20% Tax

The additional 20% tax doesn't apply to distributions

made after the date that the account holder:

•

Dies,

•

Becomes disabled (see Disabled, earlier), or

•

Turns age 65.

If any of the exceptions applies to any of the distributions

included on line 8, check the box on line 9a. Enter on

TIP

CAUTION

line 9b only 20% (0.20) of any amount included on line 8

that doesn't meet any of the exceptions.

Example 1. You turned age 66 in 2023 and had no

Archer MSA during 2023. Your spouse turned age 63 in

2023 and received a distribution from an Archer MSA that

is included in income. Don't check the box on line 9a

because your spouse (the account holder) didn't meet the

age exception for the distribution. Enter 20% of the

amount from line 8 on line 9b.

Example 2. Both you and your spouse received

distributions from your Archer MSAs in 2023 that are

included in income. You were age 65 at the time you

received the distributions and your spouse was age 63

when they received the distributions. Check the box on

line 9a because the additional 20% tax doesn't apply to

the distributions you received (because you met the age

exception). However, the additional 20% tax does apply to

your spouse's distributions. Enter on line 9b only 20% of

the amount of your spouse's distributions included on

line 8.

Example 3. You turned age 65 in 2023. You received

distributions that are included in income both before and

after you turned age 65. Check the box on line 9a because

the additional 20% tax doesn't apply to the distributions

made after the date you turned age 65. However, the

additional 20% tax does apply to the distributions made

on or before the date you turned age 65. Enter on line 9b,

20% of the amount of these distributions included on

line 8.

Section B—Medicare Advantage MSA

Distributions

Complete Section B if you (or your spouse, if filing jointly)

received distributions from a Medicare Advantage MSA in

2023. If both you and your spouse received distributions,

complete a separate Form 8853, Section B, for each

spouse. Enter “statement” across the top of each Form

8853, fill in the name and SSN, and complete Section B.

Next, add lines 10, 11, 12, and 13b from the two

statement Forms 8853 and enter those totals on the

respective lines of the controlling Form 8853 (the

combined Form 8853 for both spouses). If either spouse

checked the box on line 13a of the statement Form 8853,

check the box on the controlling Form 8853. Attach the

two statement Forms 8853 to your paper tax return after

the controlling Form 8853.

If you (or your spouse, if filing jointly) received

distributions from a Medicare Advantage MSA in

2023, you must file Form 8853 with a Form 1040,

1040-SR, or 1040-NR even if you have no taxable income

or any other reason for filing Form 1040, 1040-SR, or

1040-NR.

Medicare Advantage MSA

A Medicare Advantage MSA is an Archer MSA designated

as a Medicare Advantage MSA to be used solely to pay

the qualified medical expenses of the account holder. To

be eligible for a Medicare Advantage MSA, you must be

enrolled in Medicare and have an HDHP that meets the

Medicare guidelines. Contributions to the account can be

made only by Medicare. The contributions and any

earnings, while in the account, aren't taxable to the

CAUTION

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account holder. A distribution used exclusively to pay for

the qualified medical expenses of the account holder isn't

taxable. Distributions that aren't used for qualified medical

expenses of the account holder are included in income

and also may be subject to a penalty.

Death of Account Holder

If the account holder's surviving spouse is the designated

beneficiary, the Medicare Advantage MSA is treated as a

regular Archer MSA (not a Medicare Advantage MSA) of

the surviving spouse for distribution purposes. Follow the

instructions in Section A for Death of Account Holder,

earlier.

If the designated beneficiary isn't the account holder's

surviving spouse, or there is no designated beneficiary,

the account ceases to be an MSA as of the date of death.

The beneficiary completes Form 8853 as follows.

•

Enter “Death of Medicare Advantage MSA account

holder” across the top of Form 8853.

•

Enter the name(s) shown on the beneficiary's tax return

and the beneficiary's SSN in the spaces provided at the

top of the form. Skip Section A.

•

On line 10, enter the fair market value of the Medicare

Advantage MSA as of the date of death.

•

On line 11, for a beneficiary other than the estate, enter

qualified medical expenses incurred by the account holder

before the date of death that you paid within 1 year after

the date of death.

•

Complete the rest of Section B.

If the account holder's estate is the beneficiary, the fair

market value of the Medicare Advantage MSA as of the

date of death is included in the account holder's final

income tax return.

The transfer isn't subject to the additional 50% tax. The

beneficiary should report any earnings on the account

after the date of death as income on the beneficiary's tax

return.

Note. If, during the tax year, you are the beneficiary of two

or more Medicare Advantage MSAs or you are a

beneficiary of a Medicare Advantage MSA and you have

your own Medicare Advantage MSA, you must complete a

separate Form 8853 for each MSA. Enter “statement” at

the top of each Form 8853 and complete the form as

instructed. Next, complete a controlling Form 8853,

combining the amounts shown on each of the statement

Forms 8853. Attach the statements to your paper tax

return after the controlling Form 8853.

Line 10

Enter the total distributions you received in 2023 from all

Medicare Advantage MSAs. These amounts should be

shown in box 1 of Form 1099-SA. This amount shouldn't

include any erroneous contributions made by Medicare (or

any earnings on the erroneous contributions) or any

amounts from a trustee-to-trustee transfer from one

Medicare Advantage MSA to another Medicare

Advantage MSA of the same account holder.

Line 11

Enter the total distributions from all Medicare Advantage

MSAs in 2023 that were used only for the account holder's

qualified medical expenses (see

Qualified Medical

Expenses, earlier).

You can't take a deduction on Schedule A (Form

1040) or Schedule A (Form 1040-NR) for any

amount you include on line 11.

Lines 13a and 13b

Additional 50% Tax

Medicare Advantage MSA distributions included in

income (line 12) may be subject to an additional 50% tax

unless one of the following exceptions applies.

Exceptions to the Additional 50% Tax

The additional 50% tax doesn't apply to distributions

made on or after the date that the account holder:

•

Dies, or

•

Becomes disabled (see Disabled, earlier).

If either of the exceptions applies to any of the

distributions included on line 12, check the box on

line 13a. Next, if either of the exceptions applies to all the

distributions included on line 12, enter -0- on line 13b.

Otherwise, complete the Additional 50% Tax

Worksheet—Line 13b to figure the amount of the

additional 50% tax to enter on line 13b.

CAUTION

Additional 50% Tax Worksheet—Line 13b

Keep for Your Records

1. Enter the total distributions included on Form 8853, line 12, that don't meet either of the exceptions to the additional

50% tax ................................................................................. 1.

2. Did you have a Medicare Advantage MSA on December 31, 2022?

No.

STOP

Enter one-half of line 1 above on Form 8853, line 13b.

Yes. Enter the value of your Medicare Advantage MSA on December 31, 2022 .........

3. Enter the amount of the annual deductible for your HDHP policy on

January 1, 2023 ........................................... 3.

4. Multiply line 3 by 60% (0.60) .................................................. 4.

5. Subtract line 4 from line 2. If zero or less, enter -0- .................................................. 5.

6. Subtract line 5 from line 1. If zero or less, enter -0- .................................................. 6.

7. Enter one-half of line 6 here and on Form 8853, line 13b ............................................. 7.

Instructions for Form 8853 (2023)

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Section C—Long-Term Care (LTC)

Insurance Contracts

See Filing Requirements for Section C, later. Also, for

more information, see Pub. 502.

Definitions

Policyholder

The policyholder is the person who owns the proceeds of

the LTC insurance contract, life insurance contract, or

viatical settlement, and also can be the insured individual.

The policyholder is required to report the income, even if

payment is assigned to a third party or parties. In the case

of a group contract, the certificate holder is considered to

be the policyholder.

Qualified LTC Insurance Contract

A qualified LTC insurance contract is a contract issued:

•

After December 31, 1996, that meets the requirements

of section 7702B, including the requirement that the

insured must be a chronically ill individual (defined later);

•

Before January 1, 1997, that met state law

requirements for LTC insurance contracts at the time when

and in the state where the contract was issued and hasn't

been changed materially.

In general, amounts paid under a qualified LTC

insurance contract are excluded from your income.

However, if you receive Per Diem Payments (defined

next), the amount you can exclude is limited.

Per Diem Payments

Per diem payments are payments of a fixed amount made

on a periodic basis without regard to actual expenses

incurred. Box 3 of Form 1099-LTC should indicate whether

payments were per diem payments.

Chronically Ill Individual

A chronically ill individual is someone who has been

certified (at least annually) by a licensed health care

practitioner as:

•

Being unable to perform at least two activities of daily

living (eating, toileting, transferring, bathing, dressing, and

continence), without substantial assistance from another

individual, for at least 90 days, due to a loss of functional

capacity; or

•

Requiring substantial supervision to protect the

individual from threats to health and safety due to severe

cognitive impairment. An individual must have been

certified within the past 12 months as meeting this

condition.

Accelerated Death Benefits

Generally, amounts paid as accelerated death benefits

under a life insurance contract or for the sale or

assignment of any portion of the death benefit as part of a

viatical settlement are fully excludable from your gross

income if the insured is a

Terminally Ill Individual (defined

below). Accelerated death benefits paid with respect to an

insured individual who is chronically ill are generally

excludable from your gross income to the same extent as

they would be under a qualified LTC insurance contract.

Terminally Ill Individual

A terminally ill individual is any individual who has been

certified by a physician as having an illness or physical

condition that can reasonably be expected to result in

death within 24 months of the date of certification.

Line 15

Special rules apply in determining the taxable payments if

other individuals received per diem payments under a

qualified LTC insurance contract or as accelerated death

benefits with respect to the insured listed on line 14a. See

Multiple Payees, later, for details.

Line 18

If you have more than one LTC period, you must

separately calculate the taxable amount of the

payments received during each LTC period. To do

this, complete lines 18 through 26 on separate Sections C

for each LTC period. Enter the total on line 26 from each

separate Section C on the Form 8853 that you attach to

your tax return. See the

instructions for line 21 for the LTC

period.

Line 19

Enter the total accelerated death benefits you received

with respect to the insured listed on line 14a. These

amounts are generally shown in box 2 of Form 1099-LTC.

Include only amounts you received while the insured was

a chronically ill individual. Don't include amounts you

received while the insured was a terminally ill individual. If

the insured was redesignated from chronically ill to

terminally ill in 2023, only include on line 19 payments

received before the insured was certified as terminally ill.

Line 21

The number of days in your LTC period depends on which

method you choose to define the LTC period. Generally,

you can choose either the

Contract Period method or the

Equal Payment Rate method. However, special rules

apply if other persons also received per diem payments in

2023 under a qualified LTC insurance contract or as

accelerated death benefits with respect to the insured

listed on line 14a. See Multiple Payees, later, for details.

Method 1—Contract Period

Under this method, your LTC period is the same period as

that used by the insurance company under the contract to

compute the benefits it pays you. For example, if the

insurance company computes your benefits on a daily

basis, your LTC period is 1 day.

CAUTION

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If you choose this method for defining the LTC

period(s) and different LTC insurance contracts for

the same insured use different contract periods,

then all such LTC contracts must be treated as computing

benefits on a daily basis.

Method 2—Equal Payment Rate

Under this method, your LTC period is the period during

which the insurance company uses the same payment

rate to compute your benefits. For example, you have two

LTC periods if the insurance contract computes payments

at a rate of $175 per day from March 1, 2023, through May

31, 2023, and then at a rate of $195 per day from June 1,

2023, through December 31, 2023. The first LTC period is

92 days (from March 1 through May 31) and the second

LTC period is 214 days (from June 1 through December

31).

You can choose this method even if you have more than

one qualified LTC insurance contract covering the same

period. For example, you have one insurance contract that

pays $100 per day from March 1, 2023, through

December 31, 2023, and a second contract that pays

$1,500 per month from March 1, 2023, through December

31, 2023. You have one LTC period because each

payment rate doesn't vary during the LTC period of March

1 through December 31. However, you have two LTC

periods if the facts are the same except that the second

CAUTION

insurance contract didn't begin making payments until

May 1, 2023. The first LTC period is 61 days (March 1

through April 30) and the second LTC period is 245 days

(May 1 through December 31).

Line 22

Qualified LTC services are necessary diagnostic,

preventive, therapeutic, curing, treating, mitigating, and

rehabilitative services, and maintenance or personal care

services required to treat a chronically ill individual under

a plan of care prescribed by a licensed health care

practitioner.

Line 24

Enter the reimbursements you received or expect to

receive through insurance or otherwise for qualified LTC

services provided for the insured for LTC periods in 2023.

Box 3 of Form 1099-LTC should indicate if payments were

made on a reimbursement basis.

Generally, don't include on line 24

reimbursements for qualified LTC services you

received under a contract issued before August 1,

1996. However, you must include reimbursements if the

contract was exchanged or modified after July 31, 1996,

to increase per diem payments or reimbursements.

Multiple Payees

If you checked “Yes” on lines 15 and 16 and the only

payments you received were accelerated death benefits

CAUTION

Filing Requirements for Section C

Did you (or your spouse, if ling

jointly) receive payments in

2023 made on a per diem or

other periodic basis under an

LTC insurance contract?

Yes Yes

Yes

Were any of those payments

made under a qualied LTC

insurance contract?

Did you (or your spouse, if

ling jointly) receive any

accelerated death benets in

2023 from a life insurance

policy that were made on a per

diem or other periodic basis?

Did you (or your spouse, if

ling jointly) receive any

accelerated death benets in

2023 from a life insurance

policy that were made on a per

diem or other periodic basis?

Were any of the payments paid

on behalf of a chronically ill

(not terminally ill) individual?

Don’t complete

Section C.

Complete all of Section C.

Complete all

of Section C.

Go through this chart for each insured person for whom you received

long-term care (LTC) payments. See Deﬁnitions, earlier.

Start Here

Complete only

lines 14a, 14b, and 17

of Section C.

Complete only

lines 14a, 14b, 15, 16,

17 (if applicable), and 26

of Section C.

Yes

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that were paid because the insured was terminally ill, skip

lines 17 through 25 and enter -0- on line 26.

In all other cases in which you checked “Yes” on

line 15, attach a statement duplicating lines 18 through 26

of the form. This statement should show the aggregate

computation for all persons who received per diem

payments under a qualified LTC insurance contract or as

accelerated death benefits because the insured was

chronically ill. Each person must use the same LTC

period. If all the recipients of payments don't agree on

which LTC period to use, the contract period method must

be used.

After completing the statement, determine your share

of the per diem limitation and any taxable payments. The

per diem limitation is allocated first to the insured to the

extent of the total payments the insured received. If the

insured files a joint return and the insured's spouse is one

of the policyholders, the per diem limitation is allocated

first to them to the extent of the payments they both

received. Any remaining limitation is allocated among the

other policyholders pro rata based on the payments they

received in 2023. The statement showing the aggregate

computation must be attached to the Form 8853 for each

person who received a payment.

Enter your share of the per diem limitation and the

taxable payments on lines 25 and 26 of your individual

Form 8853. Leave lines 21 through 24 blank.

Example 1

Anna was chronically ill in 2023 and received 12 monthly

payments on a per diem basis from a qualified LTC

insurance contract. She was paid $2,000 per month

($24,000 total). Anna incurred expenses for qualified LTC

services of $150 per day ($54,750) and was reimbursed

for one-half of those expenses ($27,375). She uses the

equal payment rate method and thus has a single benefit

period for 2023 (January 1–December 31). Anna

completes Form 8853, lines 20 through 26, as follows.

Line Amount

20 $24,000 ($2,000 x 12 months)

21 $153,300 ($420* x 365 days)

22 $54,750 ($150 x 365 days)

23 $153,300

24 $27,375 ($75 x 365 days)

25 $125,925

26 $ -0-

*$420 is the 2023 per diem limit for periodic

payments received under a qualified LTC

insurance contract. See Rev. Proc. 2022-38,

section 3.61.

Example 2

The facts are the same as in Example 1, except Anna's

adult children, Ben and Cleo, each also own a qualified

LTC insurance contract under which Anna is the insured.

Neither Ben nor Cleo incurred any costs for qualified LTC

services for Anna in 2023. From July 1, 2023, through

December 31, 2023, Ben received per diem payments of

$5,000 per month ($30,000 total) and Cleo received per

diem payments of $3,000 per month ($18,000 total).

Anna, Ben, and Cleo agree to use the equal payment rate

method to determine their LTC periods.

There are two LTC periods. The first is 181 days

(January 1–June 30) during which the per diem payments

were $2,000 per month. The second is 184 days (July 1–

December 31) during which the aggregate per diem

payments were $10,000 per month ($2,000 under Anna's

contract + $5,000 under Ben's contract + $3,000 under

Cleo's contract).

An aggregate statement must be completed for the

second LTC period and attached to Anna’s, Ben's, and

Cleo's forms.

Step 1. They complete a statement for Anna for the first

LTC period as follows.

Line Amount

20 $12,000 ($2,000 x 6 months)

21 $76,020 ($420 x 181 days)

22 $27,150 ($150 x 181 days)

23 $76,020

24 $13,575 ($75 x 181 days)

25 $62,445

26 $ -0-

Step 2. They complete the aggregate statement for the

second LTC period as follows.

Line Amount

20 $60,000 ($10,000 x 6 months)

21 $77,280 ($420 x 184 days)

22 $27,600 ($150 x 184 days)

23 $77,280

24 $13,800 ($75 x 184 days)

25 $63,480

26 $ -0-

Step 3. They allocate the aggregate per diem limitation of

$63,480 on line 25 among Anna, Ben, and Cleo. Because

Anna is the insured, the per diem limitation is allocated

first to her to the extent of the per diem payments she

received during the second LTC period ($12,000). The

remaining per diem limitation of $51,480 is allocated

between Ben and Cleo.

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Allocation ratio to Ben: 62.5% of the remaining

limitation ($32,175) is allocated to Ben because the

$30,000 he received during the second LTC period is

62.5% of the $48,000 received by both Ben and Cleo

during the second LTC period.

Allocation ratio to Cleo: 37.5% of the remaining

limitation ($19,305) is allocated to Cleo because the

$18,000 she received during the second LTC period is

37.5% of the $48,000 received by both Ben and Cleo

during the second LTC period.

Step 4. Anna, Ben, and Cleo each complete Form 8853

as follows.

Anna's Form 8853:

Line

1st LTC

Period

2nd LTC

Period Form 8853

20 $12,000 $12,000 $24,000

25 $62,445 $12,000 $74,445

26 $ -0- $ -0- $ -0-

Ben's Form 8853:

Line

1st LTC

Period

2nd LTC

Period Form 8853

20 $ -0- $30,000 $30,000

25 $ -0- $32,175 $32,175

26 $ -0- $ -0- $ -0-

Cleo’s Form 8853:

Line

1st LTC

Period

2nd LTC

Period Form 8853

20 $ -0- $18,000 $18,000

25 $ -0- $19,305 $19,305

26 $ -0- $ -0- $ -0-

Instructions for Form 8853 (2023)

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