The attorneys at Beck & Lenox Estate Planning & Elder Law, LLC have, as one of their estate planning goals, minimizing taxes for their clients whenever possible. Tax deductions for long-term care insurance premiums are included in on that. Many people buy long-term care insurance while they are healthy and well before it is needed, so that they’ll have an easier time paying for the help they need when they need it. Long-term care insurance premiums can have a positive impact on your taxes, says Smart Asset’s recent article entitled “Is Long-Term Care Insurance Tax Deductible?”
Long-term care insurance works like any other insurance product — you enter into a contract with an insurance company, pay premiums and then have access to funds to pay for long-term care later in life. The amount you pay in premiums and how long you pay depends on the individual contract you enter. Long-term care insurance can be used to pay for various services, including:
- Nursing homes
- Assisted living facilities
- Adult daycare centers
- Private care
Long-term care insurance premiums are tax deductible. However, there are rules you’ll need to know. First, to be eligible for a tax deduction, the premiums you pay must exceed 7.5% of your adjusted gross income. For self-employed people, the rules are a bit different. The premium can be taken as a tax deduction as long as they’ve made a net profit.
Second, there is a limit to how much you can deduct based on age. These are the limits for this year:
- 40 and under: $450
- 41-50: $850
- 51-60: $1,690
- 61-70: $4,510
- 71 and older: $5,640
In order to qualify for tax deductions for long-term care insurance premiums, the policies must meet certain regulations. Check with your insurance broker on that. And remember, insurance policies can be a big part of your estate plan. Be sure to work with an experienced estate planning attorney like the ones at Beck & Lenox to make sure your plan is complete.
Reference: Smart Asset (Oct. 20, 2022) “Is Long-Term Care Insurance Tax Deductible?”