In 1997, the federal government began offering tax perks to commend people for buying long-term care insurance, including tax-qualified policies. Congress created these policies to encourage both insurance companies and consumers to embrace long-term care insurance.
Under a tax-qualified policy, long-term care insurance premiums may be listed as itemized deductions on federal tax returns. Additionally, benefits from a qualified policy are received tax-free. Many providers exclusively offer these policies, as more than 80 percent of long-term care policies sold in the U.S. are tax-qualified.
Those who buy long-term care insurance now can claim it on next year’s tax returns and continue to do so every year premiums are paid. Deductions for the 2012 tax year range from $350 to more than $4,000. These deductions typically increase each year.
Similar to premium expenses, any long-term care costs paid out of pocket may also be tax deductible. This means that you can claim any professional home care, nursing home or other long-term care bills as a medical deduction on your income tax return. However, these expenses may not be deducted for home care provided by a family member unless that person is a licensed professional.
Many states also offer tax credits or deductions for long-term care coverage. In some states, tax breaks are applied to both tax-qualified and non-tax-qualified policies. Some states also give other benefits such as allowing Medicaid applicants with exhausted benefits to keep their home as a reward for having long-term care coverage.
Long-term care insurance offers protection that no other insurance can provide and with the tax incentives currently in place, it makes economic sense as well. Contact us today for more information about all the benefits of long-term care insurance.