Taxpayers buying long-term care insurance will see an increase in the amount they can deduct from their 2017 taxes, per the Internal Revenue Service, (IRS). These tax breaks are designed to reflect changes in inflation, preventing tax-payers from unmanageable expenses.
For long-term care participants to be eligible for the tax-break, the premiums they pay and the additional medical expenses must meet or exceed 10% of their income. The deduction is applicable for the taxpayer, his or her spouse, and any dependents, unless the taxpayer is self-employed. The premium deduction is determined by the age of the taxpayer at the end of the taxable year.
Long-Term Care Deductions for 2017:
- 40 years old or less: $410 Maximum deduction
- Between 41 and 50 years old: $770 Maximum deduction
- Between 51 and 60 years old: $1,530 Maximum deduction
- Between 61 and 70 years old: $4,090 Maximum deduction
- More than 70 years old: $5,110 Maximum deduction
In addition to the increased deductibles, the IRS also announced that per diem or indemnity long term care insurance policies are not included in income. However, if they exceed the beneficiaries total qualified long-term care expenses (or $340 per day, whichever is greater), they may be included. These long-term care policies pay a specific amount per day, rather than monthly or annually.
Which Policies Qualify?
Policies must have been issued on or after January 1, 1997, and must offer the beneficiary protection against inflation and features to protect from nonforfeiture. The beneficiary is allowed to deny inflation and nonforfeiture protection, but the policy is required to offer it. You may also be able to use the deductions if your policy was issued before January 1, 1997 if you were grandfathered into the law and approved by the insurance commissioner of the state in which they the policy was purchased.
Contact Jorgensen, Brownell & Pepin, P.C. to speak with a lawyer about your deductions.