The money that you pay for long term care services is treated as a medical expense, which is considered as a deductible, based on Section 213(d) of the Internal Revenue Section (IRS) Code. However, did you know that you do not have to be chronically ill to obtain long term care tax deductions?
According to the tax law, unreimbursed expenses on long term care (LTC) services which you have availed for yourself or for a loved one, such as your spouse, parent or child, that exceed 7.5% of your Adjusted Gross Income (AGI) may be deducted on your tax return.
To qualify for the said tax deduction, however, a licensed medical practitioner or health care provider must have had certified in the past year that you or your loved one who received care has been unable to perform the basic activities of daily living (ADL) for 90 consecutive days due to a chronic disease.
Based on federal law, the six ADLs that could qualify an individual for LTC tax deductions are bathing, dressing, eating, transferring, toileting, and continence.
Now if you think about it, there is actually no point in waiting for an event to trigger the need for LTC before cutting down your taxes because you can do this right now while you are healthy. You only have to buy a tax qualified long term care insurance (LTCI) policy because the premium that you will pay into your coverage shall be treated as a medical expense, and therefore you can deduct this on your tax return.
Long Term Care Tax Deduction from the Right Plan
Who does not aspire for lower taxes? This will make all taxpayers in the country so happy but unfortunately, there are too many obligations that the government has to get done so taxes continue to be a burden.
Choosing the right LTC plan, though, will allow everybody to reduce his annual taxes at a far greater rate. One of the ideal LTC plans that financial advisers strongly recommend is a tax qualified LTCI policy.
Premiums paid into tax qualified LTCI policies are treated as medical expenses and can be automatically deducted on the tax returns of tax paying policyholders. The amount of paid LTCI premiums that shall be treated as a deductible shall be based on the age of a policyholder at the end of the taxable year.
For example, a 52-year-old policyholder can deduct $1,310 on his tax return because this is the deductible limit of insured people between the ages of 51 and 60 according to the 2012 Long Term Care Insurance Federal Tax Deductible Limits. Meanwhile, a policyholder who falls within the 40 and younger age bracket can deduct up to $ 350.
The above figures increase each year to keep up with inflation. So new LTCI policyholders may not feel their tax advantages at the onset but in the long run they will be able to appreciate the tax provisions that come with their policies.
Contact your LTCI specialist today to find out more about long term care tax benefits.
Keywords: what is long term care insurance, long term care planning
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