2010 Tax Deductions for Long-Term Care Insurance
The Internal Revenue Service has announced the 2010 limitations on the deductibility of long-term care insurance premiums from taxes. For the first time, the maximum deductible limit for an individual exceeds $4,000.
Premiums for "qualified" (see explanation below) are tax deductible provided that they, along with other unreimbursed medical expenses, exceed 7.5 percent of the insured's adjusted gross income. These premiums -- what the policyholder pays the insurance company to keep the policy in force -- are deductible for the taxpayer, his or her spouse and other dependents. (If you are self-employed, the tax-deductibility rules are a little different: You can take the amount of the premium as a deduction as long as you made a net profit; your medical expenses do not have to exceed 7.5 percent of your income.)
However, there is a limit on how large a premium can be deducted, depending on the age of the taxpayer at the end of the year. Following are the deductibility limits for 2010. Any premium amounts for the year above these limits are not considered to be a medical expense.
Maximum Deduction for Qualified LTCi Premiums Under Code 213(d)(10)
Attained Age Before Close of the taxable year:
Maximum deduction for the year
- 40 or less - $330
- More than 40 but no more than 50 - $620
- More than 50 but no more than 60 - $1,230
- More than 60 but no more than 70 - $3,290
- More than 70 - $4,110
What Is a "Qualified" Policy?
To be "qualified," policies issued on or after January 1, 1997, must adhere to certain requirements, among them that the policy must offer the consumer the options of "inflation" and "nonforfeiture" protection, although the consumer can choose not to purchase these features. Policies purchased before January 1, 1997, will be grandfathered and treated as "qualified" as long as they have been approved by the insurance commissioner of the state in which they are sold. For more on the "qualified" definition, click here.
Of course, these deductions are not available to everyone who owns Long-Term Care insurance. Those who are self-employed, owners of an LLC, or incorporated, will be able to get the most benefit from this schedule. I would happy to explain who benefits most from these deductions for anyone who inquires.
As in all tax matters it is best to consult your tax professional for clear advice on how much Long-Term Care insurance premiums can be deducted in your individual situation though.
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