Taxes and Long-Term Care Insurance

In 1996, the US Congress passed the Health Insurance Portability and Accountability Act of 1996 (HIPAA) that gives tax advantages to people who purchase a Tax Qualified Long-Term Care Insurance policy. The premiums may be added to other medical expense deductibles, and then deducted from the amount which is more than 7.5 percent of the adjusted gross income on the federal income tax return. The amount which can be claimed depends on the age of the taxpayer, please see chart to the left. In addition, your state may offer additional tax advantages, click here to find out.

This was one of the first of the many steps that the government is taking to make Americans aware of how important Long-Term Care Insurance is.

Limits on the Deductibility of Long-Term Care Insurance Premiums, 2010

Source: IRS, 2009

It is also important to check with a personal tax advisor to see how much you can deduct.

The goal of the tax-qualified plan was to make premiums less expensive for a policyholder, have the benefits received tax-free, and increase the amount of coverage. It was the government’s intention to stress the importance of long-term care insurance to the public.