Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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Corporation Deducts Long Term Care Insurance Premiums

Are you wondering if a corporation can deduct long-term care insurance premiums? If you operate your own business, and are classified as a corporation (as opposed to a Limited Liability Corporation or Sole Proprietorship), you will have to pay double the tax amount—for you as a worker and for your company.

To get specific online insurance quotes enter your zip code into the rate tool above!

As a business owner, you want to find every tax concession available. Details on tax deductible premiums, long term care insurance coverage, and impacts of HIPAA follow.

Can you deduct premiums?

Corporations can sometimes deduct insurance premiums as expenses. However, this is definitely not the rule for any insurance policy you have. The policy you pay on must meet specific criteria in order for it to be counted as a business expense. Business insurance is deductible in almost all cases, as the policy is directly related to the survival of the business. See form 1040 and publication 535 for help with calculating the deduction.

There are some exceptions to the “business only rule.” For example, for the self-employed sole proprietorship, the deduction for health insurance premiums may be allowable. On the other hand, there are several scenarios in which you could disqualify this deduction.

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What counts as deductible business premiums?

Generally, insurance that takes care of employees, managers and owners is considered deductible, whereas a policy paid only for the benefit of one man (or woman) is not deductible. For example, credit insurance, group hospitalization and medical insurance (for employees), liability insurance, malpractice insurance, workers compensation, contributions to a state unemployment, overhead insurance, vehicle insurance, life insurance (for employees), and business interruption insurance are all deductible. Premiums that are traditionally not deductible include self-insured reserves, a sickness or disability policy, some annuity policies and loans.

Is long-term care insurance deductible?

If you carefully analyze the wording on the IRS instructions sheet, it does say that medical insurance can include long-term care insurance. Long-term care insurance is a policy that specifically pays on nursing home or assisted living facility insurance. This policy covers a resident’s stay in a long-term care facility, whether it is indefinite or for a specific period of time.

Premiums can be very high for nursing home insurance, and moderately high for assisted living homes. Over $300 a month is considered an affordable rate. Obviously, if you found out you could count these premiums as a deduction on your taxes that would be a critical factor and could save you a lot of money for next year.

The latest news on long-term care and tax concession is that the government is realizing that most Americans can’t afford long-term care insurance on their own, and are thus offering tax incentives to encourage Americans to take personal responsibility for their future long-term care needs.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) addressed favorable tax treatment of qualified Long-Term Care insurance contracts. As of 2010, the IRS has stated that a 1035 exchange from a non-qualified annuity, directly into a traditional long-term care plan, is available. This simply means that American citizens can avoid tax payments on growth that comes from an annuity portion that is paying the insurance premiums.

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What the HIPPA Ruling Means for You

According to America’s Health Insurance Plans out of Washington, D.C., “HIPAA [the new law passed] says that qualified long-term care insurance will now receive the same tax treatment as accident and health insurance.” Long-term insurance does deserve the same classification as ordinary health insurance.

However, like ordinary health insurance, there are limits, and these could be affected by a policyholder’s age. The website reiterates that the cost of setting up a long-term care insurance for employees and contributions towards the cost of premiums are both considered business expenses.

The fact that you are a corporation is significant, since you are working through the company (and not on your own) and may very well have employees to care for. When you contribute towards the welfare of your company, you have a greater chance of qualifying for a tax concession. A sole proprietorship may also have this opportunity, however. Thus, it’s not really about your classification—it’s about whether the insurance policy is truly a business expenses.

The safe thing to do is to contact a certified public accountant and discuss your situation (and your specific long-term care insurance policy) to see whether or not your premiums qualify as a yearly deduction. You have to start somewhere.

The first step is to find a long-term care insurance company. An insurance agent can help you find a policy that is affordable and comprehensive. You might even be able to make those premiums back through tax savings.

Why the long term care insurance rates tool right now and see what you can find!