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Are long term care insurance premiums tax deductible?

Long term care insurance premiums tax deductibleIf long term care insurance is a part of your overall insurance portfolio, you may be wondering if those premiums are tax deductible. The answer is yes, however, there are limitations and regulations that are put in place by the federal government.

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These regulations must be followed in order to claim your long term care insurance premiums on your taxes. The following article will provide additional information on the regulations as well as some information that can help you decide if you need this type of coverage.

Long Term Care Insurance Premium Regulations for Tax Deduction

Since all medical expenses are tax deductible and premium payments are considered to be medical expenses, they are deductible as long as the medical expenses exceed 7.5% of the individual‘s income. This percentage is of the adjusted gross income, not the actual income. This includes premium payments for traditional health insurance plans as well as long term care insurance premiums. Since the probability for long term care increases with age, the federal government has put regulations on how much of the premium can be tax deductible and the regulation is based on age.

The thought behind this is that the older someone gets, the more long term insurance coverage they may attempt to get. The more insurance coverage purchased, the higher the premium rates will be. Because of this, the federal government allows the following premiums per year to be deducted for ages:

  • 40 and under a limit of $330
  • 41-50 the limit is $620
  • 51-60 the limit is $1,230
  • 61-70 the limit is $3,290
  • 71 or older the limit is $4,110

There are two things that are important to note about these age and limit regulations. First of all, these limits are reviewed yearly by the government and may be changed by the government as needed at the start of a calendar year. Generally an increase of $40 per age category, per year can be expected. Secondly, for married individuals, both the husband and wife can claim up to the limit in their age bracket. This is true even if the combined total exceeds the limit for an age group.

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The Ability to Claim Long Term Care Insurance Premiums

The ability to claim long term care insurance premiums is extended to individuals, spouses, and dependents. Dependents can be young children, a grown child with a disability, or a parent who is in your care. Self-employed individuals as well as those who are traditionally employed can both claim their premium amounts up to the maximum amount. Also, if your premiums are paid through a health savings account, they can be claimed at the end of the year as well.

When Long Term Care Insurance Makes Sense

Understanding the tax deductible nature of a long term care insurance premium is one thing, but you may be wondering if you even need this type of coverage. Long term care insurance is meant to pay the expenses of an individual when they need long term care.

Long term care may is necessary when an individual is diagnosed with a disease or illness that needs full time care, if gravely injured in an accident, or in need of nursing home care. It may be hard to picture any of these things happening, especially if you are a young, healthy individual. However, the cost of long term care can be financially devastating to an individual who does not have long term insurance.

If you are 65 or older, long term care insurance is highly recommended. The need for long term care is doubled when individuals reach the age of 65 and tripled at the age of 75. If you work at a dangerous job, participate in extreme activities, or have a history of certain types of diseases in your family, long term care insurance is also a good idea. If long term care is needed, the expense of a monthly premium is small in comparison to the overall cost of care.

There are many insurance companies that offer long term care insurance. To find the right company for you, try using the online insurance rates tool on this page. This convenient device will allow you to see what different companies have to offer as far as rates and quotes. Once you have this information, you can choose a company to work with or decide which companies you want to contact for additional information.

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