Did you know you could save money on your taxes by planning for your future with long term care insurance? That’s right. Tax-qualified long term care insurance policies can help you now with tax incentives and in the future by helping pay for your care.
So, what is a tax-qualified long term care policy? Here’s how it works.
Tax-Qualified Long Term Care Insurance
Long term care policies sold today qualify for certain tax advantages. These advantages are extended to working individuals, self-employed individuals, limited liability companies, S-Corporations, and C-Corporations. Our LTC Consumer Tax Guide explains all the information you need to know about each of these options and tax information by state.
In this example, we’ll focus on individuals and the current 2016 tax incentives available for tax-qualified long term care policies.
Individual LTCI Tax Incentives
The premiums for tax-qualified long term care insurance are considered a medical expense and current tax laws state you may be eligible for tax breaks. Medical expenses can be itemized on your federal income tax deductions and are deductible within limits depending on your age.
For those under age 65, if your total medical expenses (LTCI premiums and other medical expenses) are higher than 10% of your Adjusted Gross Income (AGI), you may be eligible for a deduction. For those age 65 and older, the limit is 7.5% for tax years 2013-2016.
Keep in mind, LTCI premiums beyond the eligible premiums in the table below can’t be included as a medical expense.
|2016 Eligible Premium Guidelines|
|Age Before the Close of the Tax Year||LTCI Eligible Premium|
|40 and under||$390|
|71 and over||$4,870|
Your LTCI Benefits Can Be Tax-Free
Did you know the money you receive on claim can be tax-free? If the benefits you receive from your tax-qualified long term care insurance policy don’t exceed the greater of your eligible daily long term care expenses or the per-day limit of $340 (in 2016), the benefits you receive should be tax-free.
Deductions and Credits May Vary by State
Keep in mind, deductions and credits may vary based on the state where you live. Find your state in our 2016 Tax Guide to discover more information on the specific tax advantages for your state.
As a reminder, it’s always important to speak with your tax advisor about specific questions about your taxes including any deductions and incentives available to you. While this summary is meant to be educational in nature, it isn’t meant to offer tax advice. Contact your accountant for further information about tax-qualified long term care policies and how they may help you with tax deductions.
Ready to find out how much LTCI could cost for you? Use our online quoting tool to mix and plan designs and find an affordable solution for your future.
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.