A Smart Tax Move Today… Protect Your Retirement Plan and Savings…
Long Term Care insurance protection can be 100% tax deductible as a business expense.
Plus, owners can choose who is covered, even spouses.
Plan for living a long life?
Most people believe they are likely to live a long life…into their 80s…their 90s…maybe
even longer.
When you live a long life, you are more likely to need long term care. Maybe you’ve
seen this with an aging parent, a friend or a neighbor.
The real question then is not who will take care of you…but rather, what will providing
that care do to your family?
Special tax incentives for people who plan.
Tax incentives are now available to individuals and business owners who plan ahead.
Business owners who plan now can take advantage of special tax incentives for tax-qualified
Long Term Care insurance protection.
As always, please consult your tax advisor before taking
any action.
Rules for Individuals/Self-Employed
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.
The yearly maximum deductible amount for each individual depends on the insured’s
attained age at the close of the taxable year. Deductible maximums are indexed to
increase each year for inflation.
Attained age before the
close of the taxable year |
Maximum Deduction |
|
40 or less |
$290 |
|
More than 40 but not more than 50 |
$550 |
|
More than 50 but not more than 60 |
$1,110 |
|
More than 60 but not more than 70 |
$2,950 |
Long Term Care insurance premiums may be included as an unreimbursed medical expense,
up to the age-based limit and subject to the 7.5% threshold based on the tax filer’s
adjusted gross income for the year.
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)
up to the limits shown above.
Partnerships/S-Corporations/Limited Liability Companies
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-Corps 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 then take a self-employed
health insurance deduction for this amount, not to exceed the age-based limits.
A Limited Liability Company
(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.
C-Corporations
C-Corporations benefit from complete (100%) deductibility of tax-qualified Long
Term Care insurance protection as a business expense. (Similar to traditional health
and accident insurance premiums)
100% Tax-Deductible Insurance
protection can be purchased for employees and owners. Company-paid policies can
cover spouses, even though they are not employed by the corporation…and even retirees.
Employer-paid
Long Term Care insurance premiums are not reported or included as part of the employer’s
gross income. They are not included on W-2 statements. There is no payroll tax on
amounts paid.
Corporations
may create an “Executive Carve Out” plan whereby the corporation selects and pays
the costs of insurance protection for designated key individuals.
Companies
may establish a plan for key executives along with other options whereby the employer
pays a part of the cost or offers Long Term Care insurance to employees on a purely
voluntary basis.