If you’re thinking about purchasing long term care insurance, it’s important to consider the tax advantages of a “qualified” policy versus a “non-qualified” policy. You also need to be familiar with the various potential long term care insurance tax credits and deductions that you or your business may be eligible for. Read on to learn some of the unique tax benefits that LTC has that can ultimately allow you to get the coverage you need while saving you money at the same time!
In 1996 Congress passed the Health Insurance Portability and Accountability Act (HIPAA). This bill allows for some federal income tax advantages for LTC policies that are designated “tax-qualified” or “qualified.”. LTC policies that don’t meet the requirements under this Act are known as Non-Qualified policies.
If you have a long term care policy, you may be able to deduct all or part of the premiums you pay for the policy. If the premium for your LTC, plus other qualified medical expenses exceeds 7.5 percent of your adjusted gross income, you can deduct a percentage of this premium based on your age. This deduction would be listed under medical expenses if you itemize your tax return.
If you don’t qualify for a federal tax deduction, many states offer tax deductions or tax credits for LTC insurance. Check with your state’s Department of Health to see how the tax deductibility of long term care insurance works in your state.
Another tax advantage with a qualified long term care policy is that the benefits you receive from this policy are generally not taxable as income. Therefore, any benefits you receive from your policy will not force you into a higher tax bracket.
If you have your own business, depending on how your company is structured, (C Corp, S Corp, LLC, partnership, sole proprietorship, etc.) you might have a triple tax deduction for long term care insurance premiums. The premiums, or partial premiums paid by your employees will lower their salary, thereby reducing their taxable income. Speak with your CPA, financial adviser, attorney, or other qualified tax professional for more information about the specifics of how your particular type of business entity can best take advantage of the tax benefits of long term care insurance.
If your business is paying the premiums for the employees, the premiums, or a portion of the premiums may be a tax deduction for the corporation, and the benefits paid to your employees if they have to use their policy is a tax free benefit.
Both a qualified or non-qualified long term care insurance policy can be good wealth protection tools. The possible tax advantages of a qualified long term care insurance policy might be a better choice.
Insurance companies, such as Metropolitan Life Insurance Company, Mutual of Omaha, Prudential Insurance Company of America, Transamerica Financial Life Insurance. John Hancock Insurance Company, among many others, all offer both qualified and non-qualified long term care insurance policies.
Whether you choose a qualified or non-qualified long term care policy, please consult with your accountant or financial advisor to discuss the tax advantages of such a decision. There is no substitute for putting the time in to research your options and then speaking with and experienced professional.
With the rising costs of nursing home care, in-home care, and other medical expenses, a long term health care insurance policy is a worthwhile investment in protecting your wealth, now, and in retirement.
Imagine the peace of mind both you and your family will have knowing that they are protected in the event of a chronic illness or the need for nursing home or assisted living care. With the possible tax advantages and wealth protection features of a qualified long term care policy available, what are you waiting for? Be sure and shop around and compare rates and benefits for both types of long term care health insurance policies.