We have reached that time of year where people start to organize all their tax records and prepare their tax returns. The new 2017 Tax Deductions of Long-Term Care insurance premiums have been released, don’t forget to deduct your Long-term Care insurance (LTCi) premiums you have paid each year. Yes, that is right! Premiums for “ tax-qualified” long-term care insurance policies are tax deductible. Visit the Internal Revenue Service Publication to determine what qualifies or consult a tax professional for more details on the qualifications.
For individuals, the Internal Revenue Service (IRS) considers tax-qualified LTCi premiums a medical expense. The amount of money that you are able to deduct will depend on your age and whether or not you are self-employed.
If you itemize your deductions, you can deduct your LTCi premiums under medical expenses. The chart below shows the 2016 and 2017 deductibility limits for LTCi by age according to the IRS Publication 502. The amount allowed as a “medical expense” is adjusted each year.
|Age attained before the end of the taxable year||Amount allowed as a medical expense in|
|40 or under||$390||$410|
|71 or older||$4,850||$5,110|
The tax advantages of a long-term care policy ramp up sharply if you’re self-employed. Rather than listing your premiums on Schedule A, they go directly on line 29 (“Self-employed health insurance deduction”) on Form 1040.Self-employed deduction
James Sullivan, a CPA and personal financial specialist based in Naperville, Ill., says the self-employed can reduce their taxable income substantially. “In addition, you can include eligible premiums paid for your spouse and dependents,” he says.
An extra incentive for part-timers and work-from-home parents who might now be full time but can still take advantage of the deduction.
Half of the states offer some form of tax credit or state income tax deduction as an incentive to purchase long-term care insurance, with some ranging as high as 25 percent of the total long-term care insurance premiums paid during the taxable year.