If you currently receive, or will be receiving, a pension you may be able to pay your Long Term Care Insurance premiums with pre-tax dollars.
The Pension Protection Act of 2006 (in Section 845) was a piece of legislation that will allow the premiums for a Long Term Care Insurance policy to be paid pre-tax if the premiums are paid straight from the pension.
Save bags of money in taxes.
Police, firemen, state and federal employees may have this tax savings payment method as an option. This will provide you with tax savings while protecting the greatest risk you may face in your retirement—needing long term care. Even teachers may be able to participate, so check with your pension department. If they don’t have it set up, demand that they do. If you’re in a 26% tax bracket, using the Pension Protection Act of 2006’s features will essentially save you 26% on your Long Term Care Insurance premiums.
Medicaid (your tax dollars) pays for a whopping 45% of all long term care. The reason for the high percentage is that people don’t plan, and many ultimately do need long term care. They start paying for their care our of pocket and then run out of money, after exhausting a life-times’ worth of hard work.
When the government gives tax breaks like this it encourages citizens to plan for needing long term care during their retirement themselves by buying private Long Term Care Insurance with pre-tax dollars. This is a common sense way the government can encourage action without having to over-step the Constitution and force people to buy health insurance like the current Congress, House, and Administration are trying to do with health care. That is another subject, but Whole Foods Founder John Mackey wrote a great article in the Wall Street Journal. Mackey, who said he’s an Independent, fried the circuits of the extreme left wing of the Democratic Party with this stance. I applaud his decision on speaking his mind and truly proving he is an Independent.
Long Term Care Insurance is the single most important insurance tool that a person can buy during their retirement.
Police, firemen, teachers—all who are receiving pensions may be able to buy Long Term Care Insurance pre-tax if paid by your pension department. Of course, when dealing with any tax matter refer to your CPA and pension department. If you don’t have success finding the answers give us a call and we can help you find the right person in the pension department to get to the facts.
At LTC Tree we’ve been helping people plan for long term care insurance all over the country and know that this tax savings strategy is possible as we’ve had 100+ clients take advantage of this tax rule.
