Tax Deductions: Long-Term Care Insurance
Long-Term Care Insurance
Tax Advantages for Individuals
Purchasing a tax-qualified long-term care insurance policy may offer tax advantages.
Long-term care insurance premiums may be tax deductible
Under current tax laws, you may be able to deduct a portion of the premium you pay for a tax-qualified long-term care insurance policy. Each year, the federal government sets limits for eligible premium — the amount that may be deducted.
The eligible premium amount may be claimed as a medical expense as long as your combined medical expenses exceed 7.5 percent of your adjusted gross income and you itemize deductions on your federal income-tax return.
|Eligible Premium Guidelines
for 2023 (2022 in brackets)
|At age:||You can deduct:|
|40 and younger||$480 ($450)||Source: IRS Revenue Procedure 2022-38
Eligible premiums are established annually based on the medical care components of the Consumer Price Index.
|41 – 50||$890 ($850)|
|51 – 60||$1,790 ($1,690)|
|61 – 70||$4,770 ($4,510)|
|71 and older||$5,960 ($5,640)|
Long-term care insurance policy benefits are intended to be tax-free
The benefits you receive from a tax-qualified long-term care insurance policy are intended to be tax free as long as they do not exceed the greater of your qualified long-term care daily expenses or the per-day limitation, which is $420 in 2023 ($390 in 2022).
Source: Section 7702B of the Internal Revenue Code (IRC)
Out-of-Pocket long-term care expenses also may be tax deductible
If you pay long-term care expenses out of your own pocket (i.e., home care services, nursing home care, etc.), you generally may claim these expenses as a medical deduction on your income tax return. The only exception is payment for home care provided by a family member. These expenses are not deductible unless the family member is a licensed health-care professional.
The information provided is not intended to be tax advice. Consult your tax advisor to determine the tax benefits for your situation.