Can You Deduct Long Term Care Premiums?

Term Care - Can You Deduct Long Term Care Premiums?

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One of the big concerns if you are over 50 is how are you going to pay for long term care insurance. This type of insurance is used if you come to be unable to care for yourself after having surgery, an accident or the infirmity of old age. Current statistical analyses indicate that at least 60% of all individuals will need extended help while their lifetime. It could be you need help for only a few weeks, a few months or many years.

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The premiums can be quite costly and some of us may never in effect have to use the insurance. Unfortunately, it is one of those things you may be afraid to do without. As more of the people begins to age the concern tends to be shared by more people and the government also has cause to be concerned.

The government wants individuals to protect themselves with long term care policies and has offered some help in the form of tax incentives.

Long-term care premiums are deductible as a healing cost (subject to the 7.5 percent-of-Agi floor), although how much of a deductions you can take does depend on your current age. For example, a taxpayer between ages 51 and 60 may deduct as much as ,270 in 2011 and ,310 in 2012).

In 2011, the Internal income service (Irs) also added some inflation adjustments for the tax deductibility limits of long term care insurance for 2012. State governments have also tried to help their taxpayers by contribution supplementary deductions. Currently the following states offer some type of tax deduction or prestige for extended care insurance: Alabama, Arkansas, California, Colorado, District Of Columbia, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Minnesota., Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Virginia, West Virginia, Wisconsin

A self-employed man can deduct 100% of long term care insurance premiums (subject to the maximum deductibility limits) without having to meet the 7.5% adjusted gross income healing cost requirement.

If your employer pays your premiums for you, your employer takes the tax deduction as a company expense, but age is not a factor here. Though you do not get a deduction you not have to report this benefit as income.

In the case where your employer only pays a measure of the premium, you can take the rest of the payment as a deduction but you do have use the age restrictions.

Using an Hsa to pay for the premiums does not give you a deduction but your contribution does get deducted from your gross income. If you use the money for healing expenses such as long term care the distribution is tax free.

You can also use the proceeds from an annuity to pay for long term care. The money you get from the annuity is not taxed but you do not get to make a deduction for the payment of the premium. The annuity selection is not for every person so consult your insurance agent and make sure you understand all the tax implications

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