Tax advantages of Long Term Care insurance for individuals

When an individual owns a tax qualified Long Term Care insurance plan the IRS allows a tax deduction based on age when completing their annual 1040 tax return. The allowable deduction for 2017 is:

-•- age 40 and under = $410. Up from $390 in 2016.

-•- 41 through 50 = $770. Up from $730.

-•- 51 through 60 = $1,530. Up from $1,460.

-•- 61 through 70 = $4,090. Up from $3,900.

-•- 71 and older = $5,110. Up from $4,870.

The amount of a persons deduction is added to any other unreimbursed medical expenses and then any amount above 10% of their AGI for individuals under age 65 is a deduction. Individuals 65 and older can continue to deduct, this year, amounts above 7.5% of their AGI.

When this special kind of family protection is purchased through a business more flexibility on taxes is available than with health insurance.

  • A Sole Proprietor can deduct as a business expense up to the age based schedule amount. It is not subject to the AGI limitation for individuals.
  • Businesses operating as a Partnership, or in an LLC can take the full premium as a business expense. The owner(s) then take the age based amount as a personal medical expense deduction. Premium amounts above the schedule would generally become taxable income to the owner.
  • Incorporated businesses: The entire premium is a business expense and there is no taxable income to the employee when the premium is paid or when benefits are received. One special advantage is IRS regulations allow a plan to be purchased just for the owner and spouse and select executives such as Vice Presidents and their spouses.

Want to talk about these special tax advantages? Call John C Parker [860.739.0005].

John C Parker, has achieved professional designations as a Long Term Care Insurance professional and a Registered Health Underwriter. John is licensed to conduct business in CT (644135) and RI (1058420) and does not solicit or sell in other states.

This site shares insights from extensive involvement in professional associations, industry conferences, working with leading Long Term Care Insurance organizations, and individual research. These pages do not advocate a specific company or plan.


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