Long-term care insurance can have tax benefits.
Spoiler alert for those who are young right now.
Health declines with age.
Through exercising and eating a nutritious diet, people can often delay the onset of age-related health problems.
Even so, these issues cannot be avoided forever.
According to a recent Smart Asset article titled “Is Long-Term Care Insurance Tax Deductible?,” most individuals will require long-term care at some point in their lives.
Paying for long-term care out-of-pocket can quickly eat through retirement savings and family assets.
For example, here around the Kansas City Metro area, we are seeing the monthly cost for “memory care” range from $8,000 to $13,000 … per month.
One common option is to purchase a long-term care insurance (LTCi) policy to pay for the services, to include assisted living facilities, nursing homes, adult day care centers, and private home care.
In addition to preserving your nest egg, there are also tax benefits to long-term care insurance.
Insurance premiums may be deducted on your tax return.
What are the rules for such deductions?
The premiums you pay must be greater than 7.5 percent of your adjusted grow income for those who are not self-employed.
For self-employed individuals, deductions can be taken as long as the business has recorded a net profit.
Age also factors into the tax deduction.
What are the deduction limits for 2022?
Individuals age 40 and under can deduct $50.
Individuals age 41 to age 50 can deduct $850.
Individuals age 51 to age 60 can deduct $1,690.
Individuals age 61 to age 70 can deduct $4,510.
Finally, those age 71 and older can deduct $5,640.
Note: not all plans qualify for a tax deduction.
You should contact your insurance broker to confirm your desired LTCi plan satisfies any specific requirements to be deductible.
Reference: Smart Asset (Oct. 20, 2022) “Is Long-Term Care Insurance Tax Deductible?”