Tax Incentives From Long Term Care Insurance

By Author: Cynthia Clarke
Total Articles: 18
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Long term care insurance (LTCI) has more to offer besides access to quality care and asset protection. Insured individuals can enjoy years of long term care tax deduction, a special incentive that is exclusive to them.

Nothing can stop the cost of long term care (LTC) from increasing so individuals who plan their future health care needs responsibly are acknowledged by the government through annual income tax deductions.

Insured Americans do not have to wait for an event to trigger their need for care just so they can deduct their LTC expenses from their annual taxes. Through the annual premiums that they pay into their LTCI policies they can enjoy huge tax deductions right away.

Under Section 213(d) of the IRS Code it is stipulated that premiums paid into tax-qualified LTCI policies are treated as medical expenses and thus considered deductibles. Every year, the government comes up with a table for LTCI Federal Tax Deductible Limits to guide insured folks in determining how much of their paid LTCI premiums shall be treated as medical expenses.
The age that they have ...
... attained before the close of the taxable year will determine their deductible limit.

In the 2012 Federal Tax Deductibility that was published by The Federal Long Term Care Insurance Program, the deductible limit of an insured person who is 40 or younger is $350. For an individual who is between 41 and 50 it’s $660, $1,310 for those between 51 and 60, $3,500 for those within the 61 to 70 age bracket, and $4,370 for insured individuals who are 71 and over.

Long Term Care Tax Deduction

Younger LTCI policyholders may have smaller deductible limits but the older that they get the bigger these become. The government hopes that through this little consolation it can alleviate many Americans’ financial worries stemming from the high cost of care.

Meanwhile, those who do not wish to avail an LTCI policy can simply wait for the need for LTC to arise before they can receive LTC tax deductions. Choosing this option, however, will not ensure them that they will be able to stay afloat financially as the cost of care increases at an unpredictable rate.

For example, in previous years the median daily and annual costs of nursing homes would increase by 4%, in-home care 2%, while assisted living 6%. But did you know that by 2030 LTC costs are predicted to increase fourfold?

Imagine if the annual cost of a private room in a nursing home, which is currently $81,030, shoots up to $324,120 in 2030. Who else can afford it? Definitely nobody.

Contrary to massive reports that retirees are receiving a lump sum from the companies that they’ve served for more than half of their lives, many are getting less than $50,000 upon retirement. How can this amount possibly cover the average cost of in-home care, let alone nursing home care?

Apart from long term care tax deduction, it’s worth studying the other features of a tax-qualified LTCI policy. If you need clarifications you can always contact your LTCI agent.

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