Query: My spouse and I simply bought long-term care insurance coverage and have been advised that I can get a tax deduction for the premiums we pay. Our medical bills are often higher than the 7.5% adjusted gross earnings limitation offering us with an itemized deduction. Is it true that I also can deduct the long-term care premiums as a medical expense?
Reply: Lengthy-term care insurance coverage offers certainty that dwelling well being care and nursing dwelling companies will likely be out there when and if they’re wanted. As a bonus, the IRS permits some good tax breaks for certified long-term care insurance coverage insurance policies.
Advantages are expressed as each day or month-to-month maximums. The coverage could pay equal advantages for each nursing dwelling and residential care companies. Extra possible, it should pay solely a proportion of the nursing dwelling most for dwelling care. The insured could possibly receive equal advantages by paying a better premium. Additional premiums could be paid for automated inflation changes to the profit maximums. The inflation safety characteristic could be costly however in all probability is definitely worth the funding.
The insured is charged stage month-to-month premiums for the long-term care protection. Premiums are based mostly on the age while you enroll. So long as you proceed paying the premiums, you’ll stay coated no matter modifications in well being or advancing age. The older you might be while you purchase the coverage, the costlier the premiums. For those who wait too lengthy and develop a critical medical situation, it’s possible you’ll not be capable of discover protection at any worth.
The premium prices for long-term care insurance coverage are handled as medical bills for Type 1040 itemized deduction functions and as a tax-advantaged worker profit if the employer pays the premiums. Itemized deductions are restricted to age-based quantities which might be adjusted for inflation yearly. These age-based quantities are then mixed together with your different medical bills. If the whole exceeds 7.5% for 2021 of adjusted gross earnings, the surplus could be written off as an itemized deduction on Schedule A. Self-employed individuals can deduct from gross earnings 100% of the certified quantities paid for medical insurance protection. The 2021 most quantity of long-term care insurance coverage premiums that may be handled as medical expense is as follows: age at December 31, 2021 – 40 or underneath, $450; age 41 to 50, $850; age 51 to 60, $1,690; age 61 to 70, $4,520; and over 70, $5,640.
A certified coverage can cowl solely “certified long-term care companies, should be assured renewable, and should not have any money worth. Certified long-term care companies embody diagnostic and preventive care, remedy, and rehabilitation. Upkeep and private care companies are additionally included if the insured meets the tax-law definition of “chronically sick.” To be thought of chronically sick, the insured should need assistance with at the least two out of six “actions of each day dwelling.” The six actions are consuming, toileting, transferring (for instance, transferring from mattress to chair), bathing, dressing, and continence.
Barry Dolowich is a licensed public accountant and proprietor of a full-service accounting and tax follow with workplaces in Monterey. He could be reached at 831-372-7200. Please tackle any inquiries to him at PO Field 710, Monterey 93942 or e mail: [email protected].
