Long-Term Care Insurance can be a very valuable tool in your asset protection arsenal. Did you know that the Internal Revenue Service is increasing the amount taxpayers can deduct from their 2016 taxes for the long-term care insurance premiums they pay? This applies to only to “qualified” long-term care insurance policies. A qualified insurance policy must satisfy the requirements put forth by the National Association of Insurance Commissioners. In this case requirements include the following:
• Option of “inflation”/“nonforfeiture” protection
• Triggers for activities of daily living (ADL’s) that include 2 of 6 impaired Activities of Daily Living for at least 90 days as indicated by a licensed health care practitioner
• Triggers for cognitive impairment when substantiated supervision is needed to maintain the patients safety; and
• Policies issued before January 1, 1997 are automatically grandfathered in as a qualified policy upon approval by the state insurance commissioner
Additionally, qualified policies and other unreimbursed medical expenses are tax deductible to the extent that together they exceed 10% of the insured’s adjusted gross income. For taxpayers 65 and older it is 7.5% of the insured’s gross income. There is still a limit on the total premium amount that can be deducted. Deductibility limits are set based on the age of the taxpayer at the end of the year. For 2016 the limits are as follows:
• Age 40 or less: $390
• More than 40 but not over 50: $730
• More than 50 but not over 60: $1,460
• More than 60 but not over 70: $3,900
• More than 70: $4,870
More information directly from the IRS can be found here.
We can help guide your family as you plan for long-term care. Please give us a call at (631) 424-2800.