2013 Long Term Care Tax Deductions

The benefits of tax-qualified long term care insurance policies are generally received tax-free by the policyholder.

Your long term care insurance premiums may be tax-deductible.

For owners of Subchapter C Corporations the tax benefits of long term care insurance policies are exceptional. 

2013 Long Term Care Insurance Tax Guide 

Long Term Care Insurance Tax Deductions for Individuals

Tax-qualified long term care insurance policies are considered medical expenses.  For an individual who itemizes income tax deductions, long-term care insurance premiums are tax deductible to the extent the premiums exceed 10 % of an individual's adjusted gross income (AGI).

Exception: The deduction threshold is 7.5% of AGI for any year between 2013 to 2016 that  you are 65 or older. (IRC §213(a)).

The amount of the long term care insurance premium treated as a medical expense is limited to the age-based numbers in the table below.

Long Term Care Insurance Tax Deductions for the Self-Employed 

A self employed individual may deduct 100% of his/her long term care insurance premium up to the 2013 age-based eligible premium amounts listed below.

Age 40 and below:   $360

Age 41-50               $680

Age 51-60               $1360

Age 61-70               $3640

Age 71 and over      $4550

Long Term Care Tax Deductions for Corporations

Long Term Care Insurance Tax Deductions for Owners of Partnerships, Subchapter S Corporations, and LLCs

Partners of a Partnership, members of an LLC, or shareholders of greater than 2% of a Subchapter S Corporation are taxed as self-employed individuals.  The entity pays the long term care insurance premium.  The partner, member, shareholder includes the long term care insurance premium in its AGI.  The partner, member, shareholder may deduct the age-based eligible amount on its tax return.  It is not necessary to meet the 10 % AGI threshold.

Long Term Care Insurance Tax Deductions for Owners of Subchapter C Corporations

When a C Corporation purchases long term care insurance on behalf of any of its employees, spouses or dependents, the corporation is eligible to take a 100% tax deduction as a business expense on the total of the long term care insurance premiums paid . 

The long term care insurance premium tax deduction is not subject to the age-based limitations in the table above.

The employer may even discriminate and be selective on the class of employees it wishes to elect to cover with long term care insurance benefits.