For individuals, current tax laws state that you may be eligible for tax breaks on premium of tax-qualified1 LTCI as it is considered a medical expense. If you itemize your federal income tax deductions, medical expenses are deductible to a certain extent, based on your age.
If you are under age 65, and your combined medical expenses (tax-qualified LTCI and other medical expenses) exceed 10% of your Adjusted Gross Income (AGI), you may be eligible for a deduction. Currently, if you are 65 or older, the threshold is 7.5% of AGI for tax years 2013-2016. Any portion of LTCI premiums outside of the eligible premiums listed below cannot be includable as a medical expense.2
For more information on tax credits, ask about specific policies from given providers in your state; then check with your tax advisor or refer to LTC Consumer’s 2015 Tax Guide as most policies are tax qualifying.
LTC Consumer is an independent, free online service to help consumers understand what long term care insurance is, how it works, and how to evaluate coverage options. Our mission is to provide an educational, no-pressure resource for learning about long term care planning, with the opportunity to speak with specialists who can help them.
Disclaimer: This article does not constitute legal or tax advice and should not be construed as tax or insurance advice. It was neither written nor intended for us by any taxpayer for the purpose of avoiding penalties, and it cannot be so used. Please speak with your tax advisor or long term care insurance specialist in regards to a particular situation.
1A tax-qualified policy is based on the guidelines defined by the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
2Allowable deductions are set by the Internal Revenue Code (IRC) section 213(d)(10).