Long-Term Care Insurance and Taxes
Premiums paid for LTC insurance may be eligible for tax deductions as a form of medical expense. In order to qualify for this kind of deduction, your LTC insurance premiums and other un-reimbursed medical expenses must exceed 10% of your adjusted gross income. The maximum amount of premiums that you can deduct for a given year depends on your age and will increase over time. In 2017, the limit on how much could be deducted ranged from $410 for those 40 or younger all the way up to $5,110 for people 71 and older.
It should be noted that these deductions are only possible with LTC insurance plans that are tax-qualified (TQ). Such plans must meet certain federal standards and are required to be labeled as such when they are offered. The majority of LTC insurance plans on the market today are tax-qualified. If you are unsure whether the plan you are looking at is a TQ plan, contact your agent or the insurance company. Tax-qualified versus non-tax-qualified plans are discussed in further detail in our article “Things to Look out for When Choosing a Policy”.
How do long-term care insurance tax deductions work for those who are self-employed?
In most cases, health insurance premiums, including those for long-term care, are tax-deductible for self-employed taxpayers, allowing you to deduct 100% of your out-of-pocket long-term care insurance premiums up to the age-determined amount. This is true for policies covering yourself as well as those for your spouse and any dependents you claim.
While there are no specific thresholds that must be met in order to make deductions like this, you are not allowed to make them during any month in which you or your spouse is eligible to participate in a subsidized long-term care insurance plan through an employer. The deduction also cannot exceed the income that you collect from your business. Provided you meet these requirements, these write-offs are available regardless of whether you have itemized your deductions. Write-offs like these can be great because they lower your adjusted gross income, which increases your chances of receiving certain tax breaks. However, the way that these deductions work also means that you cannot deduct the premiums when calculating your self-employment tax liability.
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Services Covered by An LTC Insurance Policy
Help protect your savings from the costs of
care NOT COVERED
by traditional insurances or Government programs, like Medicare.
It helps you choose where you receive care and avoid the nursing
- 40% receiving long-term care are working-age adults, ages of
- About 70% over age 65 will need long-term care services in their
lifetime. By 2020, this number is expected to exceed 12 million.*
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Sample Long-Term Care Insurance Savings
Up to 30% Spousal/Partner Discount
Up to 15% Preferred Health Discount
Up to 5% Small Business Discount
* Discounts are not cumulative and vary by state.