Long-term care insurance (LTCI) policies provide not only the financial means to help pay for care in the future, but tax breaks today to offset the expense of LTCI premiums.* For example:
- An LTCI policyholder can deduct policy premiums if he or she (1) itemizes deductions and (2) can claim unreimbursed medical expenses that total more than 10 percent of his or her adjusted gross income (for taxpayers age 65 and older the threshold is 7.5 percent of AGI through 2016). However, very few people can claim this level of medical expenses.
- Self-employed people who show a net profit may deduct LTCI premiums for themselves, spouses and eligible dependents.
- Policyholders can pay for LTCI premiums with tax-free withdrawals from a health savings account (HSA).
- Some states offer tax credits or deductions for LTCI premiums. Check out The American Association for Long-Term Care Insurance (AALTCI) website to see if your state offers a tax benefit.
* Ed McCarthy. Summit Professional Networks. Oct. 12, 2015. “Four Tax Facts to Share With LTCI Prospects.” http://www.talkaboutltc.com/2015/10/12/four-tax-facts-to-share-with-ltci-prospects. Accessed Oct. 12, 2015.