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Tax Benefits Help You Provide Your Long Term Care
through Insurance
By Shane Flait, © 2008
Congress passed The Health
Insurance Portability and Accountability Act (HIPPA)
of 1996 (HIPPA)
to help people to take financial responsibility for
their long term care (LTC). It provides for
deductibility of qualified long term care expenses
and excludes from taxable income your qualified long
term care benefits[1].
It also provides increasingly higher tax deduction
limits for LTC insurance premium payments as you get
older.
Therefore you can add long term care expenses paid
for both qualified long-term care services and
premiums for qualified long-term care insurance to
your medical expenses deduction on your Schedule A
of your IRS form 1040. The operable phrase is
‘qualified’.
Qualified long-term care services are necessary
diagnostic, preventive, therapeutic, curing,
treating, mitigating, rehabilitative services, and
maintenance and personal care services that are
required by a chronically ill individual and
provided through a plan of care prescribed by a
licensed health practitioner. And you’re chronically
ill (i.e. needing long term care) when within the
last 12 months, a licensed health practitioner has
certified you as unable to perform at least 2 of the
ADLs (activities of daily living – dressing, eating,
toileting, transferring, bathing, and continence)
without help for at least 90 days.
Qualified Long-Term Care insurance contracts are
those that provide only coverage of long-term care
services. They must be guaranteed renewable and must
not provide for a cash surrender value that can be
paid, assigned, pledged or borrowed. And lastly it
must not pay for expenses that would be reimbursed
under Medicare, except as a secondary payer.
The amounts of these LTC
premiums you can include in medical expenses are
limited though they increase substantially with age.
See the table for includible limits on LTC premiums.
|
Age |
Limit of LTC premiums includible in medical
expense (2008) |
|
40 or under |
$289 |
|
41 to 50 |
$530 |
|
51 to 60 |
$1,060 |
|
61 to 70 |
$2,830 |
|
71 or over |
$3580 |
Your LTC benefits are generally excludable from
taxable income as long as they're used for qualified
long term care services (e.g. nursing home, home
care, personal care and maintenance services.
Shane Flait is a writer and educator. Get more at
www.EasyRetirementKnowHow.com
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