LTCI & State Tax in the U.S.

Please note that tax law and how it is interpreted can change quickly. Always check current tax regulations before you make any decision regarding long-term care insurance.

Please also note that your right to LTCI tax deductions might depend on secondary factors such as your income, your net worth, your investments and your debt. US and International debt might be treated differently. You might not have the right to a deduction if you have a Norwegian Lån uten sikkerhet even if you would have the right to a deduction if you had the equivalent unsecured personal loan from a US bank. The location of the corporate headquarters of you LTCI provider might also affect your right to deductions. 

In most cases the law is straight forward and easy to understand.  It is an exception to the rules that your debt etc affect your right to an LTCI deduction.  We are only mention it to make you understand that you never should take things for granted. Verify everything. A professional tax advisor can help you with your specific situation. This article is not intended as tax advice.

ltci cheapMany U.S. states are currently offering tax incentives for long-term care insurance. There is also a lively debate in several states about either providing tax incentives for LTCI or enhancing existing tax incentives for LTCI. This is definitely a subject where applicable legislation is prone to change from one year to the other, so it is important to obtain current and up to date advice.

The information below was current at the time of writing, but applicable legislation can change quickly so it is important to always check current state regulations before you make any decision regarding LTCI.

Please note that taxpayers may need to meet state specific requirements to qualify for any of the deductions mentioned below. Just because a state is offering certain tax incentives for LTCI, that doesn’t mean that the incentives are available to anyone.

State or district Information
Alabama Individuals are allowed itemized deductions, but only for qualified LTCI and the amount is limited.

Businesses (incorporated or not incorporated) are allowed to deduct LTCI as reasonable compensation expense.

California Deduction is allowed to the limits provided in the federal Internal Revenue Code.
Colorado Credit can be claimed for 25% of LTCI premiums payed for the individual and spouse.

However, credit is only given if the federal taxable income is:

  • Less than $50,000 for an individual
  • Less than $100,000 for two individuals filing joint return and claiming credit for two insured
  • Less than $50,000 for two individuals filing joint return and claiming credit for one insured
District of Columbia Deduction from gross income allowed for annual premium if LTCI fulfills certain requirements. Deduction is limited to $500 per year, per individual.
Hawaii Same as federal tax law, but subject to 7.5% of HI adjusted gross income instead of federal adjusted gross income.
Idaho Deduction allowed for premium paid for your own LTCI, for a dependent and/or for an employee. Full cost of premium can be deducted, as long as the premium is not otherwise deducted.
Indiana Deduction allowed for full cost of premium for qualified LTCI for taxpayer and taxpayer’s spouse.
Kansas A $1,000 subtraction from the federal adjusted gross income for premium costs for qualified LTCI.
Kentucky Deduction from adjusted gross income allowed for full cost of LTCI premiums.
Louisiana Credit against the individual income tax for premiums for qualifying LTCI. The amount of the credits equals 10% of the total amount of premiums paid each year by each individual claiming the tax credit.
Maine Only LTCI certified by the Superintendent of the State qualify for deductions. The amount subtracted must be reduced by the amount claimed as a deduction for federal income tax purposes.

Employers paying for employee’s LTCI may qualify for tax credit, according to a formula equal to the lowest of $5,000, 20% of the costs or $100 for each employee covered.

Maryland Individuals:

  • One-time credit against the state income tax can be claimed for the full cost of premium for qualifying LTCI, but there is an upper limit at $500 per insured.
  • No credit if the insured was covered by LTCI before July 1, 2000.
  • No carryover allowed.
  • Credit can not be claimed by more than one taxpayer with respect to the same individual.

Employers:

  • Credit of up to 5% of cost for LTCI provided as part of benefit package.
  • Credit is limited to $5,000 total or $100 per insured employee.
Minnesota Credit can be claimed for LTCI premiums, but no more than the lowest of these two alternatives:

A.) 25% of premiums paid that are not deducted from federal taxable income

B.) $100 for individual, or $200 for couples filing joint tax return

Mississippi Credit can be claimed for 25% of premiums for qualified LTCI for self, spouse, parent, parent-in-law, or dependent. The credit is limited to $500.
Missouri Deduction allowed for all non-reimbursed costs for qualified LTCI, provided that they are not included in itemized deductions.
Montana Deduction allowed for full premium of qualified LTCI for self, parents, grandparents, and dependents.

 

Tax credit is allowed for premium for qualified LTCI for qualified family member. The size of the credit is based on taxpayer’s adjusted gross income, but is never more than $5,000 per tax year for one insured, or more than $10,000 per tax year for two or more insured.

Nebraska Deduction for contribution to Long Term Care Savings Plan. Limited to $2,000 per couple filing jointly return or $1,000 for any other return. Amount deducted for federal income tax purposes may not be deducted again at state level.
New Jersey Taxpayer is allowed to deduct premiums for LTCI only if they exceed 2% of adjusted gross income and cannot be reimbursed.
New Mexico When medical expenses, including LTCI premiums, is $2,800 or more, a taxpayer is allowed an exemption of $3,000 provided that these expenses aren’t reimbursed or otherwise covered.

Taxpayer aged 65 or older, and who are not a dependent of another taxpayer, is allowed to claim a credit of $2,800 for medical care expenses, such as LTCI premiums for self, spouse and dependent, but only if expenses are at least $2,800 for the tax year and cannot be reimbursed.

New York Individual:

  • Credit for 20% of premium for qualifying LTCI.
  • Any credit amount in excess of taxpayer’s tax liability for the year can be carried over to future tax years.

Employer:

  • Credit for 20% of premium for qualifying LTCI for employee.
  • Credit is non-refundable.
  • Credit may not reduce the tax to less than the minimum tax due.
North Carolina Credit for 15% of LTCI premiums for self, spouse and/or dependent. Maximum $350 per insured.

Credit is only given if adjusted gross income is:

  • Less than $60,000 for single
  • Less than $50,000 for married filing separately
  • Less than $80,000 for head of household
  • Less than $100,000 for married filing jointly
  • Less than $100,000 for qualifying widower
North Dakota Credit for LTCI premiums for self and/or spouse. Limited to $250 per tax year.
Ohio If the LTCI is federally qualified, Ohio lets you deduct the part of the premium that isn’t deducted from federal adjusted gross income. Deduction allowed for LTCI premium for self, spouse and/or dependents.
Oregon Individuals:

  • Credit for LTCI premium for self, parents and/or dependents.
  • Credit is limited to $500 or 15% of premiums, which ever is smallest.

Employers:

  • Credit for LTCI premium for max $500 per employee covered.
Virginia Deduction from federal adjusted gross income allowed for LTCI premiums if the individual has not claimed the deduction for federal tax purposes or a credit under Virginia tax code 58.1-339.11.

Virginia tax code 58.1-339.11 permits a credit for LTCI premium against the taxpayer’s income taxes. This credit may not exceed 15% of LTCI premium. The credit may not be claimed if the individual has claimed a deduction for federal tax purposes.

West Virginia Deduction of full LTCI premiums for self, spouse, parents and/or dependents, but any amount deducted when determining federal income tax may not be included in the state-level deduction.
Wisconsin Deduction of full LTCI premiums for self and spouse, but any amount deducted when determining federal income tax may not be included in the state-level deduction.

Same as federal tax law

State Comment
Arkansas A deduction is allowed to the limits provided in the federal Internal Revenue Code
Iowa A deduction is allowed to the limits provided in the federal Internal Revenue Code
Oklahoma
Rhode Island
South Carolina
Vermont

States and territories where there is no broad-based state income tax and no credit or deduction for LTCI

Alaska Florida Michigan Puerto Rico Utah
Arizona Georgia Nevada South Dakota Washington
Connecticut Illinois New Hampshire Tennessee Wyoming
Delaware Massachusetts Pennsylvania Texas