Long Term Care (LTC) Insurance is a product sold to help cater for costs that arise from long term care. It provides for the general health conditions that are not covered by Medicare, health insurance and Medicaid.
Is its premium tax deductible? A taxpayer may be eligible for a tax credit or get tax-deductible premiums.
What Determines How Much You Get
The IRS, Internal Revenue Service, specifies the number of money taxpayers can remove from their salaries and commit it towards long term care insurance. Premiums, in LTC, are deductible for the policyholder, your spouse, and their dependents.
Long Term Care Insurance Tax Deductions for Individuals
The LTC is tax-deductible to the extent when combined with other unreimbursed medical charges exceed 10% of your adjusted gross income (AGI). The amount an individual can deduct is in the below list.
Long Term Care Insurance Tax Deductions for Self-Employed Business Owners
A self-employed individual may deduct 100% of his/her premium up to the 2020 age-based eligible premium amounts listed below.
Amount Individuals and Self-employed Can Deduct
The amount of insurance premium treated as a medical expense is limited to the age-based numbers.
- 40 and below: $430
- 41-50: $810
- 51-60: $1630
- 61-70: $4350
- 71 and above: $5430
Long Term Care Deduction Exceptions
The tax deductions for long term care put in place by the IRS do not apply to hybrid policies like annuity policies and life insurance with the advantages of long-term care. Premium deductions have a limit based on your age as on the last day of the year. These deduction limits are provided every New Year. Premiums exceeding the provided deductions are not taken as a medical expense.
Long Term Care Insurance Tax Deductions for Subchapter S Corporations, LLCs, and LLPs
Owners of more than two percent of shares in Subchapter S Corporations, persons belonging to LLCs, and members of partnerships are treated as self-employed persons. These individuals have to pay the LTC premiums. The shareholder, member, and partner combine the premium in their AGI. They may also deduct the age-based qualified amount from the tax return. The good thing is that they do not have to satisfy the ten per cent AGI requirement.
Long Term Care Insurance Tax Deductions for Owners of C Corporations
People who own Sub-Chapter C Corporations enjoy exceptional tax advantages on their long term care insurance. This is because, when this type of corporation buys long term care insurance for its employees, dependents, and spouses, the organization is allowed to take one hundred percent deduction as a business expense over the entire amount of premiums paid.
It is at the employer’s discretion to choose persons eligible for the long term insurance cover. Additionally, each state has its own rules governing the credits and tax deductions for long term care insurance.
The long term care insurance premiums are tax-deductible. It is, however, important for you to understand the nature of these premiums before you settle for one.
Additionally, each state has its own rules governing the credits and tax deductions for long term care insurance. Understand it in relation to your employment status as well as according to the regulations of your state. By doing this, you will be able to make the right choices concerning the LTCI.