Many people are taking a closer look at buying long-term care insurance to protect themselves and their families — just in case. If you are thinking about buying long-term care insurance, you’ll be interested to know that, within limits, premiums paid for qualified policies are deductible as an itemized medical expense. For 2020, premiums for qualified policies are tax deductible to the extent that they, along with other unreimbursed medical expenses, exceed 10% of your adjusted gross income.
The typical long-term care insurance policy will pay for nursing home, home care, or other long-term care arrangements after a waiting period has expired, reimbursing expenses up to a maximum limit specified in the policy. Eligibility for reimbursement usually hinges on the covered individual’s inability to perform several activities of daily living, such as bathing and dressing.
Premiums are eligible for a deduction only up to a specific dollar amount (adjusted for inflation) that varies depending upon the age of the covered individual. The IRS limits for 2020 are:
|Long-Term Care Insurance Premium Deduction Limits, 2019|
|40 or under||$430|
|Source: Internal Revenue Service|
These limits apply on a per-person basis. For example, a married couple over age 70 filing a joint tax return could potentially deduct up to $10,860 ($5,430 × 2). Keep in mind, however, that, for individuals under age 65, itemized medical expenses are deductible only to the extent that they, in total, exceed 10% of adjusted gross income (AGI).
As everyone’s situation is different, consider contacting your tax and legal professionals to discuss your personal circumstances.