Do I need to file Form 8853 if my long-term care insurance policy pays on a reimbursement basis?

Generally, no. Form 8853 is specifically required for per diem or indemnity-style LTC contracts, where the insurer pays a fixed daily amount regardless of actual costs incurred. Reimbursement policies that pay only up to actual qualified long-term care expenses result in benefits that are excludable from income without any Form 8853 calculation. Check Box 3 of your Form 1099-LTC or review your policy terms to confirm the payment basis.

What is the IRS per diem exclusion limit for long-term care benefits?

The IRS publishes an inflation-adjusted per diem exclusion amount each year. For any day the insured is a chronically ill individual, per diem LTC benefits up to this daily limit are excluded from gross income. The exclusion is not subject to a separate income or cost test — even if actual expenses are lower than the limit, benefits within the threshold are excluded. The applicable figure for each tax year can be found in the Form 8853 instructions or IRS Revenue Procedures issued in the prior fall.

Can I still contribute to an Archer MSA if I also have an HSA?

Generally, you cannot contribute to both an Archer MSA and an HSA in the same year. If you were an Archer MSA participant before HSAs became available, you may still maintain and use your existing account, but dual contributions to both types of accounts in the same year are not permitted. Most practitioners advise existing Archer MSA holders to evaluate rolling those funds into an HSA if their plan qualifies, to simplify administration and take advantage of HSA's broader contribution limits.

What happens if I take a non-qualified distribution from my Archer MSA?

Non-qualified Archer MSA distributions — those not used for qualified medical expenses — are included in your gross income and, if you are under age 65 and not disabled or deceased, are also subject to an additional 20% tax computed on Form 8853. Both the income inclusion and the additional tax apply simultaneously. Exceptions exist for distributions after the account holder's death or disability, or after reaching age 65, at which point distributions are taxed as ordinary income without the additional penalty.

What is a 'chronically ill individual' for purposes of the LTC per diem exclusion on Form 8853?

A chronically ill individual is someone who has been certified within the prior 12 months by a licensed healthcare practitioner as being unable to perform at least two activities of daily living (ADLs) for at least 90 days due to a loss of functional capacity, or as requiring substantial supervision due to severe cognitive impairment. This definition aligns with the requirements under IRC Section 7702B and directly determines eligibility for the LTC per diem exclusion. Insurers typically require this certification before paying LTC benefits, and a copy should be maintained with your tax records.

Where do taxable long-term care benefits from Form 8853 get reported on Form 1040?

Taxable LTC benefits computed on Form 8853, Section B, Line 28 flow to Form 1040 as other income and are typically reported on Schedule 1, Part I. The completed Form 8853 must be attached to your return so the IRS can verify the exclusion calculation. Because Form 1099-LTC reports gross benefits without netting out the exclusion, the IRS matches the 1099-LTC against the return and will expect to see Form 8853 if any exclusion is claimed.

Healthcare

Form 8853: Archer MSAs and Long-Term Care Insurance Contracts

Used to report Archer MSA contributions and deductions, and to compute the taxable portion of long-term care insurance benefits received on a per diem basis.

Download Form 8853 PDF About on IRS.gov Instructions PDF

Overview

IRS Form 8853 is used to report activity related to Archer Medical Savings Accounts (MSAs) and to determine the taxable portion of benefits received under certain long-term care (LTC) insurance contracts. The form serves two distinct but related purposes: Section A covers Archer MSA contributions and the corresponding above-the-line deduction, while Section B covers the taxation of per diem or periodic payments received under qualified long-term care insurance contracts or accelerated death benefits from life insurance policies.

Archer MSAs, authorized under IRC Section 220, are tax-advantaged savings accounts available to self-employed individuals and employees of small employers who are covered by a High-Deductible Health Plan (HDHP). Although Archer MSAs were largely superseded by Health Savings Accounts (HSAs) following the creation of HSAs in 2003, existing Archer MSA holders can continue to make contributions and must use Form 8853 to report them. Notably, Form 8853 is the Archer MSA analog to Form 8889, which governs HSAs.

The long-term care component of Form 8853 applies when a taxpayer receives per diem or indemnity-style benefits from a qualified LTC insurance contract — meaning payments are made regardless of actual costs incurred, rather than on a reimbursement basis. Under IRC Section 7702B, a portion of such benefits may be excludable from gross income up to a daily IRS-specified limit. Amounts exceeding that limit are generally includable in income unless offset by actual qualified long-term care expenses. Taxpayers who receive these benefits will typically also receive a Form 1099-LTC from the insurer, which provides the key figures needed to complete Section B.

Who Files This Form?

A taxpayer must file Form 8853 if any of the following situations apply during the tax year:

First, any individual who made contributions to an Archer MSA — whether as a self-employed person or as an eligible employee — must file Section A to report those contributions and claim the associated deduction. Employers who contribute to an employee's Archer MSA on the employee's behalf do not require the employee to report employer contributions as income, but the employee must still account for total contributions against annual limits.

Second, any taxpayer who received distributions from an Archer MSA during the year — whether for qualified medical expenses or non-qualified purposes — must complete Section A to determine if any portion is taxable or subject to penalty. Non-qualified distributions are included in gross income and, if the account holder is not disabled or deceased and is under age 65, may also be subject to a 20% additional tax.

Third, any taxpayer who received per diem or periodic payments under a qualified long-term care insurance contract, or accelerated death benefits from a life insurance policy on a chronically ill insured, must complete Section B to determine how much, if any, of those benefits is excludable from income. The IRS publishes an annual per diem exclusion amount; benefits exceeding this threshold are taxable unless actual qualified LTC expenses equal or exceed the payments received. Insurers report these amounts on Form 1099-LTC, and taxpayers must reconcile those figures on Form 8853.

Note that reimbursement-type LTC policies — where benefits are paid only to cover actual costs — generally do not require Form 8853, as those amounts are excluded from income outright. Form 8853 is specifically required for per diem or indemnity contracts.

Key Fields

Section A, Line 1: Archer MSA contributions you made for the year

Enter total contributions you personally made to your Archer MSA during the tax year. Do not include employer contributions here; those are reported separately and are generally excludable from income. Contributions are limited based on whether you have self-only or family HDHP coverage, and the annual limit is a percentage of the plan's deductible.

Section A, Line 2: Archer MSA deduction

This is the deductible amount of your personal Archer MSA contributions, which flows to Schedule 1 as an above-the-line deduction. The deductible amount cannot exceed the contribution limit, and you cannot deduct contributions that exceed your earned income from the eligible small employer or self-employment income.

Section A, Line 5: Distributions from your Archer MSA

Enter the total distributions you received from your Archer MSA during the year, as reported on Form 1099-SA. This includes both qualified and non-qualified distributions. You will then subtract qualified medical expenses to determine whether any portion is taxable.

Section A, Line 8: Taxable Archer MSA distributions

This line reflects distributions not used for qualified medical expenses. These amounts are includable in gross income. Common mistakes include forgetting to include over-the-counter medication costs (which may or may not qualify depending on the year) and failing to account for insurance premiums paid.

Section A, Line 9: Additional 20% tax on non-qualified distributions

If you received non-qualified distributions and you are under age 65, not disabled, and not deceased, you owe an additional 20% tax on the taxable portion. This tax is computed here and carries to the tax liability section of your Form 1040. Exceptions apply for distributions made after the account holder's death or disability.

Section B, Line 20: Total LTC benefits received (per diem/indemnity contracts)

Enter the total per diem or periodic long-term care insurance benefits received during the year, as shown on your Form 1099-LTC Box 1. This should match the gross amount paid by the insurer; any adjustments for actual costs are handled in subsequent lines.

Section B, Line 22: IRS per diem exclusion amount

The IRS publishes an annual per diem dollar limit for LTC benefit exclusions. For days in the taxable year the insured was a chronically ill individual, multiply that daily limit by the number of days the policy paid benefits. This exclusion can significantly reduce or eliminate taxable LTC benefits for many filers.

Section B, Line 25: Qualified long-term care costs incurred

Enter the actual qualified long-term care services expenses paid during the year. If your actual costs equal or exceed the per diem benefits received, additional taxable income may be reduced. These costs must relate to a chronically ill individual and must be for services prescribed by a licensed healthcare practitioner.

Section B, Line 28: Taxable LTC benefits

This line captures the amount of LTC benefits that must be included in gross income after applying the per diem exclusion and actual expense offset. The resulting taxable amount flows to Form 1040 as other income. Many taxpayers are surprised to find taxable benefits here even when they are genuinely ill, because per diem payments can exceed both the IRS limit and actual costs.

Filing Deadlines

Due Date

April 15

With Extension

October 15

Late Filing Penalty

Filed with Form 1040; subject to the same failure-to-file and failure-to-pay penalties.

Step-by-Step Instructions

1
Gather your Form 1099-SA (Archer MSA distributions), Form 1099-LTC (long-term care insurance benefits), any Archer MSA contribution records, and documentation of qualified medical expenses and actual LTC service costs before you begin.
2
Determine which sections of Form 8853 apply to you. Complete Section A if you made or received Archer MSA contributions or distributions during the year. Complete Section B if you received per diem or indemnity-style LTC insurance payments or accelerated death benefits on a chronically ill insured.
3
For Section A, enter your personal Archer MSA contributions on Line 1 and calculate the deduction limit based on your HDHP coverage type (self-only or family) and the plan's annual deductible. Transfer the allowable deduction amount to Schedule 1, Line 13 (or the applicable above-the-line deduction line for your tax year).
4
Still in Section A, enter total distributions from Form 1099-SA and separately list qualified medical expenses paid from the account. Subtract qualified expenses from total distributions to identify any taxable or excess distributions.
5
If you have taxable non-qualified distributions on Line 8 and you do not qualify for an exception (under age 65, not disabled, not deceased), compute the 20% additional tax on Line 9 and carry it forward to Form 1040's tax and penalty section.
6
For Section B, enter the gross per diem LTC benefits from Form 1099-LTC Box 1 on Line 20. Confirm with your client or records whether the policy is a per diem/indemnity contract (requiring Form 8853) versus a reimbursement contract (generally not requiring Form 8853).
7
Calculate the IRS per diem exclusion by multiplying the current-year published daily limit by the number of days benefits were paid. Enter this on Line 22. If actual qualified LTC expenses exceed the per diem exclusion, you may use actual expenses instead — use whichever figure is larger to minimize taxable income.
8
Compute taxable LTC benefits on Line 28 by subtracting the greater of the per diem exclusion or actual qualified LTC costs from total benefits received. If the result is zero or negative, no LTC benefits are taxable. If positive, include that amount in gross income on Form 1040.
9
Attach the completed Form 8853 to Form 1040 and file by April 15 (or the extended deadline if an extension is filed). Retain copies of all supporting documents — 1099-SA, 1099-LTC, contribution records, and expense receipts — for at least three years.

Common Mistakes to Avoid

Completing Form 8853 for reimbursement-type LTC policies instead of only per diem/indemnity contracts.

Review the client's LTC insurance policy or Form 1099-LTC to confirm the payment basis. Box 3 of Form 1099-LTC indicates whether payments are per diem; reimbursement-based benefits paid up to actual costs are generally excludable without using Form 8853.

Confusing Archer MSA reporting (Form 8853) with HSA reporting (Form 8889) and using the wrong form.

Confirm the account type with the trustee or custodian. Archer MSAs have a separate trustee designation and are governed by IRC Section 220; HSAs are governed by IRC Section 223. Using the wrong form can cause IRS matching issues and delayed processing.

Failing to apply the IRS per diem exclusion amount when computing taxable LTC benefits, resulting in over-reporting income.

Look up the IRS-published per diem daily exclusion for the applicable tax year before completing Section B. The IRS typically announces this figure in late fall of each year. Multiplying that figure by the number of benefit days often eliminates or greatly reduces taxable LTC income.

Omitting the 20% additional tax on non-qualified Archer MSA distributions for eligible account holders under age 65.

Always cross-check whether the account holder qualifies for an exception before assuming the penalty doesn't apply. The penalty flows to the taxes and penalties section of Form 1040 and is separate from ordinary income inclusion — both apply simultaneously.

Including employer Archer MSA contributions in the personal contribution total on Line 1, which can overstate the deduction.

Employer contributions to an Archer MSA are excludable from income and are not entered on Line 1. Segregate employer contributions (reported in Box 12, Code R of Form W-2) from employee contributions before completing Section A.

Not filing Form 8853 at all when only LTC benefits were received because the taxpayer assumes the 1099-LTC is self-explanatory.

Form 1099-LTC does not self-report to the IRS in a way that automatically calculates taxable versus excludable amounts. If per diem LTC benefits were received, Form 8853 must be attached to the return to show the IRS the exclusion calculation, even if no tax ultimately results.

Frequently Asked Questions

Form 8853 is used for Archer Medical Savings Accounts (MSAs), which are governed by IRC Section 220 and are only available to employees of small employers and self-employed individuals enrolled in qualifying HDHPs. Form 8889 covers Health Savings Accounts (HSAs), which are available to a broader population and have generally replaced Archer MSAs since 2004. Both forms serve similar structural purposes — reporting contributions, deductions, and distributions — but they apply to distinct account types with separate limits and rules.

Related Forms

1099-LTC

Long-Term Care and Accelerated Death Benefits

1099-SA

Distributions From an HSA, Archer MSA, or Medicare Advantage MSA

Form 8889

Health Savings Accounts (HSAs)

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