| Federal Tax Benefits of Long Term Care Insurance |
| Long Term Care Insurance Premium Deductions for Individuals |
Individuals have two potential income tax deductions for Long Term Care Insurance premiums: itemized medical expenses and self-employed health insurance. The premiums would be treated as a medical expense for purposes of itemizing medical expenses, subject to the limits described below. Thus, the amount of premium paid for the coverage of the individual, spouse and dependents may be deducted to the extent that total medical expenses for such persons exceed 7.5% of adjusted gross income. The annual limits on the deductible amount of long term care premium for each covered person is age-based, as follows: (IRS Revenue Procedure 2002-70)
|
| Age before Close of Tax Year |
Year 2007 Premium Deduction Limit |
| 40 or younger |
$ 290 |
| 41 to 50 |
$ 550 |
| 51 to 60 |
$1,110 |
| 61 to 70 |
$2,950 |
| More than 70 |
$3,680 |
|
| Tax Information for Self-Employed Individuals |
| Self-employed individuals, including sole proprietors, partners and more than 2% shareholders of an S-Corporation, are permitted to deduct 100% of the eligible, age based premium under tax qualified LTC plans. Qualified LTC Premiums are treated as health insurance premiums and are permitted to be deducted for the taxpayer, his spouse, and dependents. (IRC Section 162 (1)). |
| 2007 Per Diem Indemnity Benefit Limitation |
| The per diem limit is the daily amount of benefits under a Tax-Qualified plan that can be received tax-free if the policy pays on an indemnity basis, that is, without regard to the expenses incurred. The per diem limit for year 2007 is $260 ($94,900/year). (IRC 7702B(d)). Benefits in excess of the per diem limit may be received tax-free if such benefits do not exceed the expenses actually incurred. |
| C Corporation |
| The full amount of employer paid long term care insurance qualifies as an accident and health plan within the meaning of IRC Sections 105(b) and 106. This means that the premium is fully deductible. An employer may select which employee's premiums the company will pay. Discrimination rules do not apply. |
| NOTE: This information is presented as a guide only. Please consult your tax advisor to discuss specifics. |
| Pdf attachments: |
| State Tax Incentives: Deductions and Credits |
| Medicare Guide |
| 2007 Tax Summary |
| |
