2016 Long Term Care Insurance Tax Deductions
The end of the year is always a good time to review your financial plans.
Here is a year-end incentive to review your long-term care plans:
Long term care insurance premiums may be tax-deductible for you as a medical expense.
For 2016, the Internal Revenue Service (IRS) has increased the amount of LTC insurance premium you may deduct by 2.5% over 2015 limits. Not only are premiums tax-deductible but also long term care insurance benefits are generally received tax-free by participants.
LTC insurance tax deductions increase as you grow older
2016 tax deduction limits for long term care insurance premiums
Age before end of year
40 or under $390
71 and older $4870
To receive long term care insurance tax deductions you must itemize your deductions on your federal tax return. Your long term care insurance premiums are included within your unreimbursed medical expenses. To receive a tax deduction, your unreimbursed medical expenses must exceed 10% of your adjusted gross income. If so, you may deduct up to the stated age-based limits above.
Self-employed individuals receive greater LTC insurance tax advantages
For self-employed individuals the advantages of deducting long term care insurance are even greater. Self-employed buyers of long term care insurance do not have to adhere to the 10% expense threshold guideline above. Self-employed individuals may deduct the entire age-based eligible amount for yourself, your spouse and your dependents so long as you do not exceed your net income.
For C-Corporations the age-based limits above and the 10% threshold do not apply. A C Corp may deduct 100% of the premium amount. This is very attractive.
Hybrid long term care insurance policies generally offer no tax deductions
Long term care insurance tax deductions are offered through traditional tax-qualified long term care insurance policies. Hybrid long term care policies that combine life insurance or an annuity with long term care benefits generally do not offer any tax deductions for your premium.
(There is one policy exception to this rule that I know of: the State Life Asset Care policy which actually combines two contracts: a base life insurance contract and an LTC contract will afford tax-deductibility of your premium for the LTC rider contract only)
Other popular hybrid LTC policies such as Lincoln Moneyguard, Pacific Life Premier Care, and Genworth Total Living Coverage afford no tax-deductions for policyowners. Still, hybrid policies can still be considered as viable planning tools as the life insurance benefits and the long term care insurance benefits will be received tax-free.
New Year's Resolution: Plan for Long Term Care
The new year is a time for you to reflect on the changes you want or need to make.
If you have not made a plan for long term care, the new year will be a perfect time for you to do so.
The cost of insurance only increases with every year as you grow older. Additionally, your health could change which might prevent you from even qualifying for coverage in the future.
Should you be in good health today and should you feel the timing is now right to move forward with getting coverage for yourself, give us a call at (800) 891-5824 or click on the quote request button below to review your options and get approved for coverage.
We work with all of the top-rated long term care insurance providers of long term care insurance including CareChoice One , Mutual of Omaha, Lincoln Financial, AARP , John Hancock, State Life, Nationwide, Pacific Life, LifeSecure and more.
Let us help you find the policy that is best for you.
Request your quote today.