Long Term Care Insurance Policy and Tax Deductions

You may be able to deduct part of the premium for a tax-qualified long term care insurance policy from your taxes as a medical expense. Benefits paid out by a qualified long term care policy will generally not be taxable as income.
Policies should state whether it is tax-qualified or non tax-qualified. Look for the statement on your policy that is similar to: "This policy is intended to be a qualified long term care insurance contract as defined by the Internal Revenue Code of 1986, Section 7702B(b)."

Long Term Care Costs and Expenses

Nursing home care can be itemized on your 1040 Schedule A. Only medical costs in excess of 7 1/2% of adjusted gross income may be tax deductible.

Long Term Care Insurance Benefits

An individual may be able to deduct part of the premiums for a long term care insurance policy and benefits paid out will generally not be taxable as income. List on Form 8853. Benefits paid to you under a non tax-qualified long term care plan may be considered taxable income. Buying a non tax-qualified plan could increase your tax liability and reduce the value of the benefits. The minimum "benefit eligibility" requirements for non-tax qualified plans are the inability to perform two of six Activities of Daily Living or cognitive impairment. However, some plans may offer benefit eligibility requirements that are more favorable.

Long Term Care Insurance Premiums

Long term care insurance premiums that you pay for on a qualified policy can be itemized on your 1040 Schedule A. Employer sponsored long term care insurance are tax free to the employee. Deductible amount varies with age limits.

For details on tax deduction eligibility and requirements contact your tax advisor, attorney, or accountant regarding the tax implications of purchasing long term care insurance.