The federal government offers an incentive for you to buy long-term care insurance. The premiums, as well as your out-of-pocket long-term care expenses; can be combined with other qualified outlays to reach the 10% medical deduction floor (the 10% applies as of 1/1/13 except for people age 65 and older and the deduction threshold will remain for that group at 7.5% through 2016, a nice senior tax break). Once you pass this amount, you can take a tax deduction as long as you itemized your return. The maximum insurance premium that you can deduct is determined by your age at the end of the tax year. For 2013, it is:
Age 40 or under: $360
Age 41-50: $680
Age 51-60: $1,360
Age 61-70: $3,640
Age 71+: $4,550
For example, if you are 65 years old at the end of 2013, you could include up to $3,640 of long-term care insurance premiums towards meeting the 7½% medical deduction base.
Many states have also recognized the importance of planning for long-term care expenses and give tax rewards to policy purchasers. The incentives range from partial deductions to actual credits for long-term care premiums towards state income taxes. The criteria to receive the deductions or credits vary as widely as the tax benefits and may include your age, the type of policy purchased, and your income. Since laws can change, you should review your state’s most current regulations to verify if you qualify for the tax break.
If you would like to see how federal and state tax incentives may possibly make a long-term care insurance policy more affordable, check off and return the enclosed coupon. We will review your most recent tax return and design a policy to meet your budget.