Long Term Care Plans Can Resolve Tax Issues

By Author: Olivia Latimer
Total Articles: 4
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Many people feel that they are torn between appreciating the results of paying their taxes and opposing further increase on tax rates. Although they know that their taxes will lead to a better America, they can’t help but feel being robbed of their hard-earned money. To get rid of this negative feeling, perhaps they should start probing into long term care tax deduction.

Owners of tax-qualified long term care insurance (LTCI) policies are definitely enjoying tax perks already. As for those who have yet to apply for coverage, it is important for them to note that apart from asset protection and instant access to a wide range of long term care (LTC) facilities, having a tax-qualified LTCI policy will guarantee huge savings on their annual taxes, as a portion of their paid premiums will be treated as medical expense pursuant to the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

Before we proceed, though, it is important that potential LTCI buyers familiarize themselves first with the features ...
... of a tax-qualified LTCI policy so that they do not confuse this with a non tax-qualified policy; or else they will not qualify for tax incentives.

Tax-qualified policies stipulate that the insured should require assistance with two or all six activities of daily living (ADL) or be cognitively impaired to trigger benefits. These policies should also include consumer protection provisions such as inflation protection that is based on the age of the policyholder when policy was purchased.

Tax-qualified policies allow a 30-day free look period and during which buyers can review the coverage that they purchased. Should they decide to cancel it after the given period, the insurance company shall demand no payment from them. Tax-qualified policies also offer a non-forfeiture benefit rider.

Long Term Care Tax Deduction

An individual who buys a tax-qualified LTCI policy for his spouse or parents apart from his own and pays for all these policies will be able to claim a portion of the paid premiums as a deductible because according to the law, LTCI premiums are treated as medical expenses.

The amount of paid LTCI premiums, however, that will be considered as deductible will be based on the age of the insured before the end of the taxable year and the allowable deductible limits specified in the Internal Revenue Code (IRC) Sec. 213(d).

For this year, policyholders 40 years of age or younger are allowed to deduct up to $350. Those between 41 and 50 have a deductible limit of $660 while policyholders between 51 and 60 can deduct up to $1,310. The maximum deductible of those aged 61 to 70 is $3,500 while individuals who have attained at least 70 years old can deduct as much as $4,370.

As an insured individual gets older his maximum deductible limit increases to ensure that it keeps up with inflation.

Paying taxes is part and parcel of everybody’s life but it should not cause distress. For more information on long term care tax deduction, consult your LTCI specialist.

Visit our website today to start your long term care planning and to find out what is long term care insurance all about.