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| Long Term Care Insurance Policy and Tax Deductions
You may be able to deduct part of the premium for a tax-qualified
long-term care insurance policy from your taxes as a medical expense.
Benefits paid out by a qualified long-term care policy will generally
not be taxable as income.
Policies should state whether it is tax-qualified or non tax-qualified.
Look for the statement on your policy that is similar to: "This
policy is intended to be a qualified long-term care insurance
contract
as defined by the Internal Revenue Code of 1986, Section 7702B(b)."
Long Term Care Costs and Expenses
Nursing home care can be itemized on your 1040 Schedule A. Only
medical costs in excess of 7 1/2% of adjusted gross income may be
tax deductible.
Long Term Care Insurance Benefits
An individual may be able to deduct part of the premiums for a long-term
care insurance policy and benefits paid out will generally not be
taxable as income. List on Form 8853. Benefits paid to you under
a non tax-qualified long-term care plan may be considered taxable
income.
Buying a
non
tax-qualified plan could increase your tax liability and reduce the
value of the benefits. The minimum "benefit eligibility"
requirements for non-tax qualified plans are the inability to perform
two of six Activities of Daily Living or cognitive impairment. However,
some plans may offer benefit eligibility requirements that are more
favorable.
Long Term Care Insurance Premiums
Long term care insurance premiums that you pay for on a qualified
policy can be itemized on your 1040 Schedule A. Employer sponsored
long term care insurance are tax free to the employee. Deductible
amount varies with age limits.
For detail tax deduction eligibility and requirements contact your
tax advisor, attorney, or accountant regarding the tax implications
of purchasing long-term care insurance.
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