Tax Advantages

Long-term care insurance is a smart tax move.  It can help protect your retirement plan and savings.

For Business Owners

Rules for Individuals

Individual taxpayers who itemize their tax deductions can treat premiums paid for tax-qualified long-term care insurance for themselves, their spouse or any tax dependents (such as parents) as a personal medical expense.

Rules for Self-Employed

Self-employed individuals can deduct tax-qualified long-term care insurance premiums as a trade or business expense similar to traditional health and accident insurance premiums.  A tax deduction is allowed for the self-employed

Rules for Partnerships, S-Corporations & Limited Liability Companies

For Tax-Qualified Long-Term Care Insurance Plans: 2011-2012 “SCHEDULE A” PREMIUM LIMITS

When filing tax returns for the year 2011, policyholders wishing to take advantage of deducting the premium of their Tax-Qualified plans must itemize medical expenses on Schedule A. Remember, based on your attained age in 2011, you can include 100% of your long-term care (LTC) insurance premium or the amount listed below, whichever is less. The amount of allowable medical expenses exceeding 7 ½ % of your Adjusted Gross Income (AGI) is the amount that can be deducted.

Following are the current tax deduction limits for individual LTC insurance premiums paid during the listed tax year at the age attained by the policyholder in that year:

Attained Age                                       Premium Limits

Before Close of Taxable Year:                2011                       2012

 

40 & under                                                          $340                       $350

41 to 50                                                                $640                       $660

51 to 60                                                                $1270                     $1310

61 to 70                                                                $3390                     $3500

71 & over                                                              $4240                     $4370

 

Disclaimer: The above information is not intended to provide legal or accounting advice. Clients should seek individual professional counseling from their personal attorney and/or accountant.

Like any other employer, a Partnership or S-Corporation may deduct premiums paid for tax-qualified long-term care insurance paid for employees, their spouses and eligible dependents.  Partners and more than 2% shareholders of S-Corporations are considered to be self-employed ‘owners’.  The amount of long-term care insurance premium paid for ‘owners’ is included in each individual’s gross income for the year.  The individual can take a self-employed health insurance deduction for this amount, not to exceed the age-based limits.

A Limited Liability Corporation (LLC) can take one of three forms: that of a sole proprietor; a partnership or a C-Corporation.  Most choose to be treated as a partnership.

Rules for C-Corporations

C-Corporations benefit from the complete 100% deductibility of tax-qualified long-term care insurance protection as a business expense similar to traditional health and accident insurance premiums.

Tax Savings Tips

Individuals who own businesses or derive self-employment income should consider the significant tax advantages of purchasing long-term care insurance protection through the business.   Long-term care insurance premiums may be paid from a Health Savings Account (HSA).

 

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