Diane "Dee" Lee

Long Term Care Specialist

Phone: (623) 251-6612
Email: dleeski@reagan.com

Tax issues related to Long Term Care Insurance

Is Long Term Care Insurance Tax Deductible?

Long term care insurance can be tax-deductible if you purchase a tax-qualified policy. There are many tax advantages to doing so, but paying your premium through a business will get you the best tax deductions. The actual amount of your premium that can be tax deductible depends on the type of business (C-Corp, S-Corp, partnership, etc.) and most benefits are generally tax free.

Long term care insurance for individuals is also classified as health insurance, so premiums paid by an individual might be deductible or partly deductible on an individual tax return in the same way health insurance premiums would be. In addition, according to sections 105 and 106 of the IRS code, employers can offer buying some of their employees an insurance policy whose premium can be tax deductible, while those employees will not be considering such premiums as added income.

Planning for Long Term Care

The federal government has long encouraged individuals to start planning for their long term care through the implementation of several legislations, most notably the Deficit Reduction Act of 2005 signed by former President Bush in 2006. The act establishes new stricter rules in transferring personal assets so that they can qualify for Medicaid assistance for long term care. In effect, this ensures that only those who really can't afford care will be able to use Medicaid funds.