Deductibility of Employer-Paid PremiumsSole Proprietors who purchase and pay for Tax-Qualified Long-Term Care Insurancepolicies for themselves, their spouses and their tax dependents may claim a deduction for the premiums paid as medical care expenses (IRC Sec. 162(l)(1)(A) and Sec. 213). Show
Prior to tax year 2003, only a percentage of the eligible Tax-Qualified Long-Term Care Insurancepremiums paid by a self-employed individual were deductible as medical care expenses. However in tax year 2003 and thereafter, the full amount of the Tax-Qualified Long-Term Care Insurance premiums paid by the self-employed individual may be deducted (IRC Sec. 162(l)(1)(B). See the following table for more information.
Further, as in the case of individual taxpayers, the amount of the Tax-Qualified Long-Term Care Insurance premiums that a self-employed individual may deduct as Self-Employed Health Insurance is subject to the following dollar limits.
The benefits of tax-qualified long term care insurance policies are generally received tax-free by the policyholder. Your premiums may be tax-deductible or you may qualify for a tax credit. All Traditional LTC policies and a very limited number of certain hybrid policies with separately identifiable LTC premium components will offer tax deductibility. The OneAmerica Asset Care, Securian SecureCare and Nationwide CareMatters II hybrid LTC policies will offer tax deductibility. Lincoln Moneyguard III, Mass Mutual CareChoice, and Brighthouse SmartCare will not offer you any tax deductibility. Long Term Care Insurance Federal Tax DeductionFor owners of Sub-Chapter C Corporations the tax benefits of long term care insurance policies are exceptional. 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 premiums paid. For entities other than C Corporations, there are age-based limitations for long term care insurance tax deductions. Long Term Care Insurance Tax Guide Long Term Care Insurance Tax Deductions for IndividualsTax-qualified policies are considered medical expenses. For an individual who itemizes income tax deductions, long-term care insurance premiums are included within your unreimbursed medical expenses and are tax deductible to the extent your total unreimbursed medical expenses exceed 7.5 % of your adjusted gross income (AGI). The amount of the insurance premium treated as a medical expense is limited to the age-based numbers in the table below. You may also use your Health Savings Account to withdraw your LTC insurance premiums, subject to the age-based limitations. Long Term Care Insurance Tax Deductions for Self-Employed Business OwnersA self employed individual may deduct 100% of his/her premium up to the 2022 age-based eligible premium amounts listed below. Age 40 and below $450 Age 41-50 $850 Age 51-60 $1690 Age 61-70 $4510 Age 71 and over $5640 Long Term Care Insurance Tax Deductions for CorporationsTax 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 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 7.5 % AGI threshold. 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 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. State Tax Deductions and Credits for Long Term Care InsuranceALABAMA ALASKA* ARIZONA*
ARKANSAS** CALIFORNIA COLORADO CONNECTICUT* DELAWARE*
DISTRICT OF COLUMBIA FLORIDA*
HAWAII
IDAHO ILLINOIS*
INDIANA IOWA** KANSAS KENTUCKY LOUISIANA MAINE MARYLAND MASSACHUSETTS* MICHIGAN* MINNESOTA MISSOURI MONTANA
NEBRASKA
NEVADA*
NEW JERSEY NEW MEXICO NEW YORK NORTH CAROLINA NORTH DAKOTA OHIO OKLAHOMA** OREGON PENNSYLVANIA* PUERTO RICO* RHODE ISLAND** SOUTH
CAROLINA** SOUTH DAKOTA* TENNESSEE* TEXAS* UTAH* VERMONT** VIRGINIA WASHINGTON WEST VIRGINIA WISCONSIN WYOMING* * No Credit Or Deduction. No Broad-Based State Income Tax. Find Your Best Long Term Care Insurance OptionsAre you seeking to buy long term care insurance? Would you like to find your best option? I work with the leading underwriters of traditional and hybrid long term care insurance including Mutual of Omaha, Lincoln Moneyguard, OneAmerica, Nationwide, Securian, Transamerica, Brighthouse, National Guardian, John Hancock, Global Atlantic and more. To receive customized illustrations and advice please call me directly at (800) 891-5824. Or complete my online quote request form. Jack Lenenberg, J.D. Testimonials |