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 Posted: Fri Jun 05, 2009 1:48 pm Post subject: long term care tax deduction |
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Is it possible to deduct one's long term care costs upon his tax return? Are there any long term care tax deduction laws?
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Rudebutterbabe
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| Posted: Sat Jun 06, 2009 3:01 am Post subject: |
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It's possible. The extent to which this can be done depends on more facts.
There are plenty of tax deductibility laws.
On the state level, every state is different.
In general, on the federal level as an individual, the eligible premiums (not the actual premiums) are treated as a medical expense and can be deducted along with other medical expenses if they exceed 7.5% of one's AGI.
Business owners, depending upon how the business is set up, have the possibility of deducting 100% of the actual premiums and not having to pick this up as income. |
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InsuranceExpert
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| Posted: Sat Jun 06, 2009 6:32 am Post subject: |
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Be really careful here. Regular long-term care insurance has different tax rules than qualified long term care coverage. The long term care tax deduction rules are also changing as more and more states get into the partnership party. See below:
| Quote: | Tax Deductible Long Term Care Insurance Premiums
Age Maximum tax deductible premium
Under 41 $280
41-50 $530
51-60 $1060
61-70 $2,830
Over 70 $3,530
Benefits paid by qualified long term care policies:
To the extent that they reimburse long term care expenses, benefits paid by an indemnity type contract are tax free. Benefits paid by a per diem contract are tax free up to $250 per day. |
Also, the costs are only tax-deductible if the insured meets the definitions of "chronically ill" and unable to meet 2 of the activities of daily living. So, if you use the benefits for anything other than that- there's no tax deduction.
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InsTeacher
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| Posted: Sat Jun 06, 2009 9:58 am Post subject: |
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Would you receive more tax benefits if you purchase plan under the partnership program?
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Flounder
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| Posted: Sat Jun 06, 2009 1:19 pm Post subject: |
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LTCi premiums that are tax-qualified are considered as medical expense. If your medical expenses are more than 7.5% of your adjusted gross earnings, then your medical expenses would be deductible in case you itemize the tax deductions. Any worth of LTCi premium that's more than the eligible premium doesn't get counted as medical expense.
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Bulldwarf
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| Posted: Sun Jun 07, 2009 5:46 am Post subject: |
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Bulldwarf, in order that long term care tax deduction should fall on the LTC costs, the insured MUST be categorized as "chronically ill" and cannot be deducted for just ANY LTC expense.
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InsTeacher
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| Posted: Sun Jun 07, 2009 5:45 pm Post subject: |
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| Quote: | | Be really careful here. Regular long-term care insurance has different tax rules than qualified long term care coverage. The tax rules on LTC are also changing as more and more states get into the partnership party. See below: |
Over here, long term care tax deduction can be explained as follows-
Policies are either tax qualfied(TQ) or not tax qualified (NTQ). Over the last several years over 98% of the policies sold have been TQ policies. I should have been more clear. I was specifically referring to TQ policies. Partnership policies are taxed identically to non-partnership policies. The difference is that partnership policies impact medicaid differently.
The premium for a TQ policy can be deducted if one is eligible for a deduction. Premiums for NQ policies can't.
| Quote: | Tax Deductible Long Term Care Insurance Premiums
Age Maximum tax deductible premium
Under 41 $280
41-50 $530
51-60 $1060
61-70 $2,830
Over 70 $3,530
Benefits paid by qualified long term care policies:
To the extent that they reimburse long term care expenses, benefits paid by an indemnity type contract are tax free. Benefits paid by a per diem contract are tax free up to $250 per day. |
These numbers are old and inaccurate. Also, these numbers only refer to the taxation of individuals and businesses can frequently deduct 100% of the premium.
| Quote: | | Also, the costs are only tax-deductible if the insured meets the definitions of "chronically ill" and unable to meet 2 of the activities of daily living. So, if you use the benefits for anything other than that- there's no tax deduction. |
One does not have to be cronically ill to deduct the premiums. The premiums are usually paid by healthy people. Individuals can deduct the eligible premiums of TQ policies to the extent that all health related expenses exceed 7.5% of their AGI. NTQ policies can't be deducted.
If somebody has a TQ policy, they won't receive benefits if they aren't chronically ill. One does not have to be chronically ill and unable to meet 2 of the ADL's. One must just be chronically ill. The basic definition is an inability to do 2 ADL's or be cognitively impaired. Ex. Someone with Alzheimers could meet the definition of being chronically ill and still be able to do all ADL's.
The long term care tax deduction is not applicable on the benefits. They are tax free (within certain limits). Reimbursements of tax qualified benefits are always tax free. Indemnity policies have a limit (currently somewhere north of $250)
The tax free benefit for NTQ policies still appears to be a gray area of the law. I would tend to agree that they are tax free if one qualifies as being chronically ill. It is possible to collect on a NTQ contract without being chronically ill.
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Guest
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| Posted: Sun Jun 07, 2009 8:29 pm Post subject: |
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| That last post was from me. |
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InsuranceExpert
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