Tax deductible long term care insurance

     As April 15th looms in in the horizon for Americans some improvements have been made in the tax deductibility on long term care insurance that you might not be aware of.  The Wicked Local which is a New England publication based out of Massachusetts did a great story on the current tax deductibility of long term care insurance.  Unfortunately, everyone still cannot deduct their premiums for long term care insurance on their taxes, however it's getting better though.  

     Even if you cannot take the long term care insurance tax deduction for federal tax purposes, many states and the District of Columbia (Washington, DC) have their own tax deductions or tax credits for long term care (LTC) insurance. The States are now offering these these incentives because they no that if their residents do not plan for long term care that the State will be left with the bill and paid through Medicaid.

     The Federal tax side with respect to LTC was born with the Health Insurance Portability and Accountability Act (HIPAA) became law in 1996, the qualified long-term care insurance policy was born, and made the premiums eligible or qualified plan deductible. Qualified long term care plans are defied by a few key points such as the benefits are not treated as taxable income, you have to meet certain age requirements, etc.  The tax savings were even extended to the tax payers spouse and eligible dependents if after adding up the medical expenses of the family for the year exceeded 7.5% of their adjusted gross income. 

The following chart goes over the maximum long-term care premium limits for taxpayers:

2007/2008
Age 40 or less: $290/$310
Age more than 40 but not more than 50: $550/$580
Age more than 50 but not more than 60: $1,110/$1,150
Age more than 60 but not more than 70: $2,950/$3,080
Age more than 70: $3,680/$3,850

     For Business owners it is much easier to deduct LTC insurance premiums they pay for their themselves and their family, employees, much like the current way that they deduct health insurance premiums. Another piece of good news is the aged based limits in the above chart do not apply. These premiums are generally not treated as taxable income to the employee.

     The article goes on to give some great specifics on potentially deducting your long term care premiums if you are a business owner.

"Owner/employees of C-corporations are usually treated as “employees” for these purposes, and so premiums are deductible to the corporation and not included in the insured's income. Owners of businesses that pass income and losses directly through to the individual owners, such as with S corporations and partnerships, may be able to fully deduct qualified premiums (subject to the age-based limits) paid for themselves, their spouses and legal dependents on their individual tax returns."  Wicked Local 

     Before buying or planning do not take this info as tax advice and be sure to check with a professional tax advisor, but at least this will give you the tools to begin the conversation to see if you can deduct your long term care insurance premiums on your taxes.

     At LTCtree we are brokers of the top long term care insurance companies in the industry, take a few minutes and complete the shot form below and with will help you shop the long term care insurance market and find the best company at the best price.