Tax advantages of Long Term Care insurance
Individuals who purchase a tax qualified Long Term Care insurance plan can receive a tax deduction. During 2011 the IRS's age based schedule for the allowable deduction is:
-•- age 40 and under = $340
-•- 41 through 50 = $640
-•- 51 through 60 = $1,270
-•- 61 through 70 = $3,390
-•- 71 and older = $4,240.
To gain this deduction the allowed amount, from this schedule, is added to any other medical expense and then any amount above 7.5% of a persons AGI can be taken as a deduction on their annual 1040.
There are additional tax advantages when this special family protection is purchased through a business. It has more flexibility than health insurance.
- A Sole Proprietor can deduct up to the age based schedule amount. It is not subject to the AGI limitation for individuals.
- Businesses operating as a Partnership, or in an LLC can take the full premium as a business expense. The owner(s) then take the age based amount as a personal medical expense deduction. Premium amounts above the schedule would generally become taxable income to the owner.
- Incorporated businesses: The entire premium is a business expense and there is no taxable income to the employee when the premium is paid or when benefits are received. One special advantage is IRS regulations allow a plan to be purchased just for the owner and spouse or select executives such as Vice Presidents and their spouses.
Want to talk about these special tax advantages? Call John C Parker [860.739.0005].
John C Parker, has achieved professional designations as a Long Term Care Insurance professional and a Registered Health Underwriter. John is licensed to conduct business in CT (644135) and RI (1058420) and does not solicit or sell in other states.
This site shares insights from extensive involvement in professional associations, industry conferences, working with leading Long Term Care Insurance organizations, and individual research. These pages do not advocate a specific company or plan.