The government, both state and federal, is sending a strong message that it will not pay for Long Term Care for most Americans.
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|Long Term Care Insurance & Taxes|
The Health Insurance Portability and Accountability Act of 1996 (Kennedy-Kassebaum) established tax-qualified Long Term Care insurance plans and defined the rules regarding taxation of benefits and deductibility of premiums.
Taxation of Long Term Care Insurance Benefits
Benefits received under a tax-qualified Long Term Care plan are generally not taxable as income. While federal tax issues are still unclear in certain areas, some states have been proactive in clearly defining what Long Term Care benefits are taxable and what are not.
Deductibility of Long Term Care Insurance Premiums
Individuals can include as itemized medical expenses, LTC insurance premiums paid in a calendar year subject to the age-based premium limitations below. Total itemized medical expenses that exceed 10 percent of Adjusted Gross Income (AGI) are deductible. Individuals age 65 and older may deduct itemized medical expenses in excess of 7.5 percent of Adjusted Gross Income. This is a temporary exemption that will expire January 1, 2017. The deductible portion of the LTC premium allowed, subject to the 7.5 or 10 percent AGI threshold, is referred to as the "eligible LTC premium."
2015 Eligible Premium Amounts
*The premium limits will increase each year, based on the medical component of the Consumer Price Index. The method may change, if Long Term Care services grow at a different inflation rate.
Please consult your personal attorney, accountant or tax advisor for further assistance.
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