The Internal Revenue Service has just released its annual inflation adjustments and cost of living adjustments for 2015. The IRS is required by tax laws to adjust the dollar amounts of multitudes of tax provisions each year to account for inflation, including the adjustments for eligible premium deductions for long term care insurance (LTCI).
Long term care insurance premiums for tax-qualified long term care insurance policies are considered medical expenses. For individuals that itemize income tax deductions when they file their tax return, medical expenses are deductible to the extent the medical expenses exceed a certain percentage of adjusted gross income (AGI).
The amount of the long term care insurance premium that is allowed as a medical expense is limited to the eligible age-based long term care insurance premiums set forth by the IRS within Internal Revenue Code section 213(d). Portions of long term care insurance premiums that are in excess of the age based limits are not allowable as a medical expense.
**Change in Threshold**
In 2013, the threshold to claim an itemized tax deduction on your federal tax return for long term care insurance premiums increased from 7.5% to 10%. Thus, your unreimbursed medical expenses now have to exceed 10% of your adjusted gross income to receive a tax deduction. An exception is for those filing a return age 65 and older. The threshold will remain at 7.5% for tax years 2013-2016 for age 65 and older filers.
Maximum 2015 Tax Deduction for Qualified Long Term Care Insurance Premiums Under IRC Section 213(d) (10)
|Attained Age Before Year End||2014 Deduction||2015 Deduction|
|Age 40 or less||$370||$380|
|Ages 41 through 50||$700||$710|
|Ages 51 through 60||$1400||$1430|
|Ages 61 through 70||$3720||$3800|
|Ages 71 and older||$4660||$4750|
Per Diem Limitation Remains Unchanged for 2015
The stated dollar amount of the per diem limitation under IRC section 7702B(d)(4) remains unchanged at $330 for 2015.
To receive a comprehensive 2015 long term care insurance tax guide please call me at (800) 891-5824.