U.S. Individual Income Tax Return

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...orms, Inst. & Pubs\All 2009\8853\Instructions for 8853\2009 I 8853.sgm

Instructions for Form 8853

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7:13 - 24-NOV-2009

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2009

Department of the Treasury
Internal Revenue Service

Instructions for Form 8853
Archer MSAs and Long-Term Care Insurance Contracts
Section references are to the Internal
Revenue Code unless otherwise noted.

General Instructions

!

CAUTION

After December 31, 2007,
contributions cannot be made to
an Archer MSA for you, unless:

If you (or your spouse, if filing
jointly) received Archer MSA or
CAUTION Medicare Advantage MSA
distributions in 2009, you must file Form
8853 with a Form 1040 even if you have
no taxable income or any other reason for
filing Form 1040.

dental expenses deduction, they do
qualify as expenses for MSA purposes.
Qualified medical expenses are those
incurred by the account holder or the
account holder’s spouse or dependent(s).
See the instructions for line 7 on page 4.
However, you cannot treat insurance
premiums as qualified medical expenses
unless the premiums are for:

Specific Instructions

• Long-term care (LTC) insurance,
• Health care continuation coverage, or
• Health care coverage while receiving

!

• 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 of an
Archer MSA participating employer.

Purpose of Form

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.

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 2009 to your Archer
MSA.
• You are filing a joint return and your
spouse (or his or her employer) made
contributions for 2009 to your spouse’s
Archer MSA.
• 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 on page 2.
• 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
2009. See the instructions for Section C,
that begin on page 5.
• You (or your spouse, if filing jointly)
received Archer MSA or Medicare
Advantage MSA distributions in 2009.

unemployment compensation under
federal or state law.

High Deductible Health Plan
An HDHP is a health plan that meets the
following requirements.

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 a
high deductible health plan (HDHP) and
have no other health coverage except
permitted coverage. You must not be
enrolled in Medicare and cannot be
claimed as a dependent on someone
else’s 2009 tax return. 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 and
Pub. 502, Medical and Dental Expenses
(Including the Health Coverage Tax
Credit). However, even though
non-prescription medicines (other than
insulin) do not qualify for the medical and
Cat. No. 24188L

Self-only
coverage

Family
coverage

Minimum annual
deductible

$2,000

$4,000

Maximum annual
deductible

$3,000

$6,050

Maximum annual
out-of-pocket expenses
(other than for premiums)

$4,000

$7,350

Other Health Coverage
If you have an Archer MSA, you (and your
spouse, if you have family coverage)
cannot have any health coverage other
than an HDHP. But your spouse can have
health coverage other than an HDHP if
you are not 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.

Disabled
An individual generally is considered
disabled if he or she is unable to engage
in any substantial gainful activity due to a
physical or mental impairment which can
be expected to result in death or to
continue indefinitely.

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Instructions for Form 8853

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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 him or her.
If the designated beneficiary is not 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 your tax
return and your 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 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 distribution is not subject to the
additional 15% 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 2 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 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 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
2009. Your account ceases to be an
Archer MSA as of January 1, 2009, and
you must include the fair market value of
all assets in the account as of January 1,
2009, on line 6a.
• You used any portion of any of your
Archer MSAs as security for a loan at any
time in 2009. You must include the fair
market value of the assets used as
security for the loan as income on Form
1040, line 21; or Form 1040NR, line 21.
Any deemed distribution will not be
treated as used to pay qualified medical

expenses. Generally, these distributions
are subject to the additional 15% 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 on page 3).

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
below. 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 on page 3.
You cannot deduct any contributions
you made after you became enrolled in
Medicare. Also, you cannot deduct
contributions if you can be claimed as a
dependent on someone else’s 2009 tax
return.

Employer Contributions to an
Archer MSA
If an employer made contributions to your
Archer MSA, you are not 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 are
allowed to make deductible contributions
to an Archer MSA. If you and your spouse
each 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 below 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
on page 3.
2. If you and your spouse have more
than one Archer MSA, complete Part I as
follows.

-2-

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.
c. 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). Do not complete lines 3 and 4
of the controlling Form 8853. Attach the
two statement Forms 8853 to your 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
2009. 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 on page 3 for details.

Line 2
Include on line 2 contributions you made
to your MSA. Also include those
contributions made from January 1, 2010,
through April 15, 2010, that were for
2009. Do not include amounts rolled over
from another Archer MSA. See Rollovers
on page 4.

Line 3
Go through the chart at the top of the Line
3 Limitation Chart and Worksheet on
page 3 for each month of 2009. Enter the
result on the worksheet next to the
corresponding month.
If eligibility and coverage of both

TIP you and your spouse did not
change from one month to the
next, enter the same number you entered
for the previous month. If eligibility and
coverage did not 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 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 of the month,
you both are treated as having only the
family coverage plan with the lowest
annual deductible.
Married filing separately. If you have
an HDHP with family coverage and are

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Instructions for Form 8853

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married filing separately, enter only
37.5% (.375) (one-half of 75%) of the
annual deductible 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 one-half of self-employment
tax deduction). Generally, net earnings
and self-employment tax deduction are
shown on the Schedule SE (Form 1040)
you complete for your business or farm.
Compensation does not include any
amounts received as a pension or annuity
and does not include any amount
received as deferred compensation.

Line 3 Limitation Chart and Worksheet
Go through this chart for each month of 2009. See the
instructions for line 3 on page 2.
(Keep for your records)
Start Here
Were you enrolled in Medicare for
the month?
No
䊲

Were you an eligible individual (see
page 1 of the instructions) on the
first day of the month?

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 2009
and they will be treated as if they had not
been contributed if:
• You make the withdrawal by the due
date, including extensions, of your 2009
tax return (but see the Note under Excess
Employer Contributions below),
• You do not 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.

䊲
䊳

No

Enter -0- on the line
below for the month.

Yes
䊲

What type of coverage did your HDHP provide on the first day of the
month? If you had more than one HDHP, see the instructions on
page 2.

Self-only coverage

Family coverage

Enter annual deductible
(must be at least $2,000
but not more than $3,000)

Enter annual deductible
(must be at least $4,000
but not more than $6,050)

$

$

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
instructions below. See Form 5329,
Additional Taxes on Qualified Plans
(Including IRAs) and Other Tax-Favored
Accounts, to figure the additional tax.

Yes

䊲

Enter 65% (.65) of the annual
deductible on the line below for the
month.

䊲

Enter 75% (.75) of the annual
deductible on the line below for the
month. If married filing separately,
see instructions beginning on
page 2.
Amount from
chart above

Month in 2009
January
February
March
April
May
June
July
August
September
October
November

Excess Employer Contributions

December

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 was not included in income on
Form W-2, you must report it as “Other

Total for all months
Limitation. Divide the total by 12. Enter here and on line 3

-3-

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Instructions for Form 8853

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income” on your tax return. However, you
can withdraw some or all of the excess
employer contributions for 2009 and they
will be treated as if they had not been
contributed if:
• You make the withdrawal by the due
date, including extensions, of your 2009
tax return (but see the Note below),
• You do not 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 2009 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 2009 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 on page 3.

MSA or a health savings account.
Generally, you must complete the rollover
within 60 days following the distribution.
You can make only one rollover
contribution to an Archer MSA during a
1-year period. See Pub. 590, Individual
Retirement Arrangements (IRAs), for
more details and additional requirements
regarding rollovers.
Note. If you instruct the trustee of your
Archer MSA to transfer funds directly to
the trustee of another Archer MSA, the
transfer is not considered a rollover.
There is no limit on the number of these
transfers. Do not 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 2009 that were
used for the qualified medical expenses
(see page 1) of:
1. Yourself and your spouse.
2. All dependents you claim on your
tax return.
3. Any person you could have claimed
as a dependent on your return except
that:
a. The person filed a joint return,
b. The person had gross income of
$3,650 or more, or
c. You, or your spouse if filing jointly,
could be claimed as a dependent on
someone else’s return.
For this purpose, a child of

TIP parents that 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’s
exemption.
However, if a contribution was made to
an Archer MSA in 2009 (by you or your
employer), do not include on line 7
withdrawals from an Archer MSA if the
individual for whom the expenses were
incurred was not covered by an HDHP or
was covered by a plan that was not an
HDHP (other than the exceptions listed
on page 1) at the time the expenses were
incurred.
Example. In 2009, you were covered
by an HDHP with self-only coverage and
your spouse was covered by a health
plan that was not an HDHP. You made
contributions to an Archer MSA for 2009.
You cannot include on line 7 withdrawals
made from the Archer MSA to pay your
spouse’s medical expenses incurred in
2009 because your spouse was covered
by a plan that was not an HDHP.

Rollovers
A rollover is a tax-free distribution
(withdrawal) of assets from one Archer
MSA that is reinvested in another Archer

!

CAUTION

You cannot take a deduction on
Schedule A (Form 1040) for any
amount you include on line 7.

-4-

Lines 9a and 9b
Additional 15% Tax
Archer MSA distributions included in
income (line 8) are subject to an
additional 15% tax unless one of the
following exceptions apply.

Exceptions to the Additional 15%
Tax
The additional 15% tax does not apply to
distributions made after the date that the
account holder —
• Dies,
• Becomes disabled (see page 1), or
• Turns age 65.
If any of the exceptions apply to any of
the distributions included on line 8, check
the box on line 9a. Enter on line 9b only
15% (.15) of any amount included on line
8 that does not meet any of the
exceptions.
Example 1. You turned age 66 in
2009 and had no Archer MSA during
2009. Your spouse turned age 63 in 2009
and received a distribution from an Archer
MSA that is included in income. Do not
check the box on line 9a because your
spouse (the account holder) did not meet
the age exception for the distribution.
Enter 15% of the amount from line 8 on
line 9b.
Example 2. Both you and your
spouse received distributions from your
Archer MSAs in 2009 that are included in
income. You were age 65 at the time you
received the distributions and your
spouse was age 63 when he or she
received the distributions. Check the box
on line 9a because the additional 15% tax
does not apply to the distributions you
received (because you met the age
exception). However, the additional 15%
tax does apply to your spouse’s
distributions. Enter on line 9b only 15% of
the amount of your spouse’s distributions
included in line 8.
Example 3. You turned age 65 in
2009. 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 15% tax does
not apply to the distributions made after
the date you turned age 65. However, the
additional 15% tax does apply to the
distributions made on or before the date
you turned age 65. Enter on line 9b, 15%
of the amount of these distributions
included in 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 2009. 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

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Instructions for Form 8853

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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 tax
return after the controlling Form 8853.
If you (or your spouse, if filing
jointly) received distributions from
CAUTION a Medicare Advantage MSA in
2009, you must file Form 8853 with a
Form 1040 even if you have no taxable
income or any other reason for filing Form
1040.

!

Medicare Advantage MSA

• Enter the name(s) shown on your tax
return and your 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 value of the Medicare
Advantage MSA as of the date of death is
included in the account holder’s final
income tax return.

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, are
not taxable to the account holder. A
distribution used exclusively to pay for the
qualified medical expenses of the account
holder is not taxable. Distributions that
are not used for qualified medical
expenses of the account holder are
included in income and also may be
subject to a penalty.

The distribution is not subject to the
additional 50% tax. Report any earnings
on the account after the date of death as
income on your tax return.

Death of Account Holder

Line 10

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 on page 2.

Enter the total distributions you received
in 2009 from all Medicare Advantage
MSAs. These amounts should be shown
in box 1 of Form 1099-SA. This amount
should not 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.

If the designated beneficiary is not 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.

Note. If, during the tax year, you are the
beneficiary of 2 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 tax return after the
controlling Form 8853.

Line 11
Enter the total distributions from all
Medicare Advantage MSAs in 2009 that
were used only for the account holder’s
qualified medical expenses (see page 1).

Additional 50% Tax Worksheet—Line 13b
1.
2.

3.
4.
5.
6.
7.

!

CAUTION

You cannot take a deduction on
Schedule A (Form 1040) 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 does not apply to
distributions made on or after the date
that the account holder —
• Dies, or
• Becomes disabled (see page 1).
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 -0on line 13b. Otherwise, complete the
worksheet below to figure the amount of
the additional 50% tax to enter on line
13b.

Section C—Long-Term
Care (LTC) Insurance
Contracts
See Filing Requirements for Section C on
page 6.

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 on page 6), or
Keep for Your Records

Enter the total distributions included on Form 8853, line 12, that do not meet either of the exceptions to the additional
50% tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Did you have a Medicare Advantage MSA on December 31, 2008?
No. STOP Enter one-half of line 1 on Form 8853, line 13b
2.
Yes. Enter the value of your Medicare Advantage MSA on December 31, 2008 . . . . . . . . .
Enter the amount of the annual deductible for your HDHP policy on
January 1, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.
Multiply line 3 by 60% (.60) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.
Subtract line 4 from line 2. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtract line 5 from line 1. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Enter one-half of line 6 here and on Form 8853, line 13b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

-5-

.

1.

.
.
.

5.
6.
7.

Page 6 of 8

Instructions for Form 8853

7:13 - 24-NOV-2009

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Filing Requirements for Section C
Go through this chart for each insured person for
whom you received long-term care (LTC)
payments. See Definitions that begin on page 5.
Start Here
Did you (or your spouse, if
filing jointly) receive
payments in 2009 made on
a per diem or other periodic
basis under an LTC
insurance contract?

䊳

Yes

Were any of those
payments made
under a qualified LTC
insurance contract?

䊳

Yes

Complete all of
Section C

No

No
䊲

䊲

Did you (or your spouse, if
filing jointly) receive any
accelerated death benefits
in 2009 from a life
insurance policy that were
made on a per diem or
other periodic basis?

Did you (or your spouse, if
filing jointly) receive any
accelerated death benefits in
2009 from a life insurance
policy that were made on a
per diem or other periodic
basis?

䊳

No

Complete only lines
14a, 14b, and 17 of
Section C

Yes
䊲

No

Yes

䊳

Were any of the payments
paid on behalf of a
chronically ill (not terminally
ill) individual?

No

䊳

Complete only lines 14a,
14b, 15, 16, 17 (if
applicable), and 26 of
Section C

Yes
䊲

Do not complete
Section C

• Before January 1, 1997, that met state
law requirements for LTC insurance
contracts at the time the contract was
issued and has not 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
below), 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

䊲

Complete all of Section C

• 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.
Accelerated Death Benefits
Generally, amounts paid as accelerated
death benefits under a life insurance
contract or under certain viatical
settlements are fully excludable from your
gross income if the insured is a terminally
ill individual (defined on this page).
Accelerated death benefits paid with
respect to an insured individual who is

A chronically ill individual is someone who
has been certified (at least annually) by a
licensed health care practitioner as —

-6-

chronically ill generally are 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 on page 7 for details.

Page 7 of 8

Instructions for Form 8853

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Line 18
If you have more than one LTC
period, you must separately
CAUTION 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
below 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
generally are shown in box 2 of Form
1099-LTC. Include only amounts you
received while the insured was a
chronically ill individual. Do not include
amounts you received while the insured
was a terminally ill individual. If the
insured was redesignated from
chronically ill to terminally ill in 2009, 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 2009 under a qualified LTC insurance
contract or as accelerated death benefits
with respect to the insured listed on line
14a. See Multiple Payees on this page 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.
If you choose this method for
defining the LTC period(s) and
CAUTION 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, 2009,
through May 31, 2009, and then at a rate
of $195 per day from June 1, 2009,
through December 31, 2009. 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, 2009, through December
31, 2009, and you have a second
insurance contract that pays $1,500 per
month from March 1, 2009, through
December 31, 2009. You have one LTC
period because each payment rate does
not 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 insurance
contract did not begin making payments
until May 1, 2009. The first LTC period is
61 days (from March 1 through April 30)
and the second LTC period is 245 days
(from 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 2009. Box 3 of Form 1099-LTC should

-7-

indicate whether the payments were
made on a reimbursement basis.
Generally, do not include on line
24 any reimbursements for
CAUTION 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 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 do not 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 2009. 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.

Page 8 of 8

Instructions for Form 8853

7:13 - 24-NOV-2009

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Example 1
Mrs. Smith was chronically ill throughout
2009 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). Mrs. Smith
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 therefore has a
single benefit period for 2009 (January
1 – December 31). Mrs. Smith completes
Form 8853, lines 20 through 26, as
follows.
Line
20

Amount
$24,000 ($2,000 x 12 mos.)

Step 1. They complete a statement for
Mrs. Smith for the first LTC period as
follows.
Line

Amount
Line

20

$12,000 ($2,000 x 6 mos.)

21

$50,680 ($280 x 181 days)

22

$27,150 ($150 x 181 days)

23

$50,680

24

$13,575 ($75 x 181 days)

25

$37,105

26

$ -0-

Step 2. They complete the aggregate
statement for the second LTC period as
follows.

$102,200 ($280 x 365 days)

22

$54,750 ($150 x 365 days)

23

$102,200

20

$39,000 ($6,500 x 6 mos.)

24

$27,375 ($75 x 365 days)

21

$51,520 ($280 x 184 days)

25

$74,825

22

$27,600 ($150 x 184 days)

$-0-

23

$51,520

24

$13,800 ($75 x 184 days)

25

$37,720

26

$1,280

Example 2
The facts are the same as in Example 1,
except Mrs. Smith’s son, Sam, and
daughter, Deborah, each also own a
qualified LTC insurance contract under
which Mrs. Smith is the insured. Neither
Sam nor Deborah incurred any costs for
qualified LTC services for Mrs. Smith in
2009. From July 1, 2009, through
December 31, 2009, Sam received per
diem payments of $2,700 per month
($16,200 total) and Deborah received per
diem payments of $1,800 per month
($10,800 total). Mrs. Smith, Sam, and
Deborah agree to use the equal payment
rate method to determine their LTC
periods.
There are two LTC periods. The first is
181 days (from January 1 through June
30) during which the per diem payments
were $2,000 per month. The second is
184 days (from July 1 through December
31) during which the aggregate per diem
payments were $6,500 per month ($2,000
under Mrs. Smith’s contract + $2,700
under Sam’s contract + $1,800 under
Deborah’s contract).
An aggregate statement must be
completed for the second LTC period and
attached to Mrs. Smith’s, Sam’s, and
Deborah’s forms.

Line

-8-

2nd LTC
Period

Form 8853

$12,000

$12,000

25

$37,105

$12,000

$49,105

26

$ -0-

$-0-

$-0-

$24,000

Sam’s Form 8853:
1st LTC
Period

2nd LTC
Period

Form 8853

20

$-0-

$16,200

25

$-0-

$15,432

$15,432

26

$-0-

$

$

Amount

Step 3. They allocate the aggregate per
diem limitation of $37,720 on line 25
among Mrs. Smith, Sam, and Deborah.
Because Mrs. Smith 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 $25,720 is allocated between
Sam and Deborah.
Allocation ratio to Sam: 60% of the
remaining limitation ($15,432) is allocated
to Sam because the $16,200 he received
during the second LTC period is 60% of
the $27,000 received by both Sam and
Deborah during the second LTC period.
Allocation ratio to Deborah: 40% of
the remaining limitation ($10,288) is
allocated to Deborah because the
$10,800 she received during the second
LTC period is 40% of the $27,000
received by both Sam and Deborah
during the second LTC period.

1st LTC
Period

20

Line

21

26

Step 4. Mrs. Smith, Sam, and Deborah
each complete Form 8853 as follows.
Mrs. Smith’s Form 8853:

768

$16,200
768

Deborah’s Form 8853:
Line

1st LTC
Period

2nd LTC
Period

Form 8853

20

$-0-

$10,800

25

$-0-

$10,288

$10,288

26

$-0-

$

$

512

$10,800
512

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